Impacts of forest eco-benefit tax on industry price levels in Shaanxi Province, China

Ecological compensation mechanism for forest resources has arise extensive interests among governments and researchers in China. Some researchers in China also believe that forest ecological compensation mechanism needs to be developed into forest eco-benefit tax. In this paper, firstly, we demonstrate the aims, theoretical foundation, design of this tax policy. Secondly, making Shaanxi Province as an example, we establish an input-output table of 42 sectors with details on forestry in 2007. Then we quantitatively analyze the impact of the tax on the industries price levels in Shaanxi Province with the Input-output price model under three scenarios and two pricing strategies, viz. cost pricing, premium pricing respectively. The first scenario is that the government has a 10% rate of forest eco-benefit tax on forestry industry only. The second scenario is that the government has a 10% rate of forest eco-benefit tax on the three sectors of furniture manufacture, timber processing, bamboo, rattan products, and paper industry. The third scenario is that the government has a 10% rate of forest eco-benefit tax on all of the above four sectors of forestry, furniture manufacture, timber processing, bamboo, rattan products, and paper industry. It reveals that the implementation of this tax policy is somewhat feasible, as it will not have significant impact on the price levels when we have 10% of this tax under the above three different scenarios. Furthermore, three industries have larger price increase than other industries in most cases. They are foodstuff manufacture; printing and cultural, education, sports products manufacture; culture, sports & recreation. Finally, the results of two pricing methods show some differences. The results of premium-pricing method are slightly larger than those of cost-pricing method under any scenarios.