Economic impact and water saving effect of tax reform policy based on open water resources embedded CGE model

Abstract

Water resources tax reform is an important price reform measure implemented by the Chinese government to promote the effective conservation and sustainable utilization of water resources. The water- saving effect and economic impact of policy implementation are one of the important bases for determining whether the tax reform can be promoted nationwide. Taking Hebei Province the first pilot province of water resources tax reform as an example, this study constructed an open water resources embedded computable general equilibrium model (CGE) while expanding the standard social accounting matrix (SAM table), and three scenarios were set up to simulate the economic impact of the implementation of the water resources tax reform policy on Hebei Province. The results show that: (1) Levying water resources tax will have a certain negative impact on the macro economy in the short term, but from a long- term perspective, the implementation of water resources tax policy can effectively promote the conservation and protection of water resources, improve the efficiency of enterprises in the use of water resources, and is conducive to the construction of ecological civilization and the sustainable development of economic and social environments; (2) Different industries have different dependencies on water resources, so the differentiated water resources tax reform policy can more effectively achieve the goal of water saving and achieve better policy results; (3) The transfer payment of water resources tax can play the role of tax regulation, effectively reduce the welfare loss caused by taxation, and reduce the negative impact on economy and society while achieving the ideal water saving effect. Finally, the article puts forward the policy recommendation that the provinces of China should coordinate policy making, policy implementation, and tax use in the process of water resources tax reform.