On the water resources tax standard and tax administration mode for urban residents in China

Water resources are one of the strategic resources that impact a country's economy, ecology, people's livelihood, and various other fields. The utilization and protection of water resources are essential to China's current ecological civilization construction and sustainable economic and social development (Zhao et al., 2023). However, with the rapid growth of the social economy and the accelerating process of urbanization, the problem of regional balance in water resources has become increasingly prominent (Wang et al., 2019). To achieve the goal of sustainable development of water resources, a series of strongly integrated economic measures and means have been gradually applied to water resources management (Hilbig & Rudolph, 2019). The reform of China's water resources fee into tax reform policy is the exploration and innovation of this practice. The feasibility of national promotion of the water resources tax reform was further investigated through pilot projects in different regions. However, most of the 10 pilot areas adhere to the principle of ‘tax and fee transformation’ when collecting water resources tax. As a result, the water resources tax failed to act as a price leverage in these pilot areas. In addition, the collection mode of the water resources tax was also ambiguous, which affected the overall effectiveness of the reform of the water resources fee into tax. Therefore, it is very important to scientifically formulate the rate standard and collection mode of water resources tax to ensure a smooth implementation of the water resources tax policy.

Since water resources tax is a kind of resource tax, its tax standard can take reference from the formulation of other resource tax standards. The fuzzy comprehensive evaluation method can reflect the complexity of the water resources system and fully consider the influence of factors such as resource endowment and economic development. It uses accurate mathematical methods to calculate the fuzzy water resources tax, resulting in a more scientific, reasonable, and practical quantitative evaluation. Therefore, based on the fuzzy comprehensive evaluation model, this paper attempts to construct a water resources tax standard calculation model and takes urban residents' water use as an example by calculating the water resources tax standard of urban residents in 28 major provinces and cities in China (due to geographical location and policy system reasons, this paper does not calculate the tax standards of Hong Kong, Macao, Taiwan, Tibet, Xinjiang, and Heilongjiang). Based on the calculation results, the spatial distribution of China's water resources value is deeply analyzed, the main contribution factors affecting the regional water resources tax standard are explored, and the dynamic adjustment of urban residents' water resources tax collection methods and tax standards is discussed.

The research content of this paper can be divided into six parts. The first part is the Introduction, which focuses on this paper's research background, purpose, and main contributions. The second part is the Literature review, which mainly reviews the current state of research on water resources tax in the existing literature and puts forward the innovation points of this paper according to the limitations of prior studies. The third part is the Methods and data sources, which mainly summarize the construction of this paper's index system and calculation model. The fourth part is the Results, which primarily analyzes this study's calculation results. The fifth part is the Discussion, which mainly discusses the research results and the tax collection mode. The sixth part is the Conclusion, which summarizes primarily some research conclusions of this paper.

Water resources tax, as a new tax item, belongs to a resources tax from the perspective of tax classification, and resources tax is also known as a green tax. Pigou (1920) advocated that taxes should be levied according to the damage to natural resources, which laid the theoretical foundation for collecting resource taxes. The government's adjustment of resources tax policy can prevent the production and consumption speed of resources (Dasgupta & Heal, 1980). By adjusting the resources tax rate and market interest rate, the development and utilization of resources can be controlled (Liu et al., 2018), and the efficiency of industrial layout can be improved (Roberto et al., 2005), to promote the sustainable growth of the regional economy (Llop & Ponce-Alifonso, 2012). Water resources tax reform is a vital water price reform measure by the Chinese government to improve the utilization efficiency of water resources, promote resource protection, and promote green and sustainable economic development. Based on the coexistence of water shortage and sustainable development requirements in China, the design of the water resources tax should focus on the significance of resource conservation, ecological protection, and green growth (Thomas & Zaporozhets, 2017) and fully reflect the intrinsic value of water resources. On the one hand, the collection of water resources tax is adequate compensation for using natural resources, which embodies the labor value, service value, and ecological value of water resources (Llop & Ponce-Alifonso, 2015). On the other hand, as an effective economic lever, the collection of water resources tax can improve the efficiency of water use and inhibit the exploitation of groundwater, thus playing a role in the protection of water resources (Sabohi et al., 2007; Berrittella et al., 2008). The primary task of levying a water resources tax is determining the tax standard. Currently, the pilot areas levy taxes through a simple method of ‘tax and fee translation’, and the taxes levied are far lower than the value of water resources (Quentin et al., 2020).

Due to the different resource endowments in different places, the water resources problems are also different. If you want to maximize the positive role of water resources tax policy, the amount of water resources tax in different places is determined according to the actual situation (Mu et al., 2022). In addition, there is no clear provision for collecting and managing water resources tax. The collection and management of water resources tax must be adapted to local conditions and play a positive guiding role in policies. These problems have affected the strategic significance of the water resources tax reform policy to a certain extent (Wu et al., 2023a). Concerning the principles of political economy, the price is the monetary expression of value (Madhoo, 2004). China has integrated water resources into the resource management category by collecting water resources tax. That requires the objective law of resource demand and supply by the market economy and guides the optimal allocation of water resources according to the value of water resources to promote regional sustainable development. However, as a quasi-public good, water resources play an important role in people's livelihoods. Therefore, it is necessary to analyze further the collection and management of water resources tax for urban residents and to ensure the normal life and production of society while achieving the goal of 'water saving' (Wang et al., 2023).

Essentially, the original intention of levying a water resources tax is not to increase the national fiscal revenue but to achieve the goal of saving water resources, protecting the ecological environment, and the sustainable development of the social economy through price leverage. So, too high, or too low tax standards will hinder the adjustment function of the water resources tax (Li & Ye, 2016). Only reasonable tax standards can play the price elasticity of water resources, inhibit the demand of water users (Bontemps & Couture, 2002), and reduce social water consumption (Tiwari & Dinar, 2002). At present, there are few studies on the calculation of water resources tax standards. Tang & Li (2019) calculated the water resources tax in Shanxi Province by using the shadow price method. Tian et al. (2021) calculated the optimal tax rate of water resources in Hebei Province by constructing the Computable General Equilibrium (CGE) model of water resources and simulated and analyzed the impact of water resources tax on social welfare. However, these studies often measure the standard of water resources tax from the perspective of social production, ignoring the unique attributes of water resources and the original intention of the government to levy water resources tax. Therefore, the results cannot achieve the goal of protecting water resources and improving water use efficiency.

The level of water resources tax standards is affected by the number of water resources and the degree of scarcity of local water resources, the degree of demand, and economic and environmental conditions (Han et al., 2015). It is difficult to use the traditional shadow price method (Molinos-Senante et al., 2016), the marginal opportunity cost model (Sun et al., 2013), or the supply and demand price model (Qian et al., 2014) to calculate water resources tax standard due to the existence of ‘incompatible principle’ in a complex system. At the same time, we found that the water resources system is fuzzy. The value accounting of water resources cannot be used as ‘valuable’ and ‘worthless’ to judge because there may be ‘high value’, ‘medium value’, or ‘low value’. The fuzzy comprehensive evaluation model can solve this problem. Jiang (1998), Duan & Liu (2016), and Zhang et al. (2019) all conducted related research on the value of water resources through this model. However, in selecting indicators for evaluating the value of water resources, the previous studies generally examined the three aspects of water supply, water use, and water quality. They comprehensively considered the resources and social and economic value of water resources, thus ignoring the ecological importance of water resources.

In summary, through the literature review, the implementation of water resources tax policy can effectively regulate water use behavior to a certain extent and improve the water use efficiency of water users. However, the current water resources tax policy still has the problem that the taxes and fees collected are divorced from reality, and the water resources tax collection and management need to be clarified. Although the existing research provides some seemingly effective methods to solve related problems, it still ignores the regional water resources endowment problem and cannot consider the actual situation of each region. The value of water resources is linked to the regulatory role of water resources tax, and a clear and feasible water resources tax collection and management model is proposed. Therefore, this study attempts to make up for the above research gaps. Based on the reality of China's water resources, this paper proposes a water resources tax standard calculation method that fully reflects the value of water resources and takes urban residents' water use as an example to calculate the water resources tax standard. This paper considers livelihood issues and discusses the collection and management mode of urban residents' water resources tax and the dynamic adjustment basis for formulating water resources tax standards.

For the formulation of water resources tax standards, first of all, it is necessary to construct an evaluation index system, then determine the weight according to the characteristics of the indicators, and finally use the fuzzy comprehensive evaluation method to determine the water resources tax.

The research on the value of water resources has yet to form a unified classification standard and evaluation system. This paper draws on the ‘Ecosystem and Human Well-Being Evaluation Framework’ proposed by the United Nations Millennium Ecosystem Assessment Report. It divides the water resources value into three categories: resource value, social value, and ecological value based on sustainable development. At the same time, drawing on the United Nations Statistics Division's idea that the real welfare of human beings should be the net welfare of deducting the cost of natural resource consumption and environmental loss. The green-sustainable evaluation index system of water resources value (composed of target layer A, criterion layer B, and index layer C) is put forward. The grading of each index can be calculated according to the actual value of each evaluation factor and compared with the grading index of each element, which can be divided into five categories: high, relatively high, medium, relatively low, and low, as shown in supplementary file S1.

From the perspective of resources value, we select indicators to characterize the abundance of water resources. Available water resources include three sources: the annual renewal of water resources, the amount of inbound water, and water storage. The water resources indicators include per capita water resources, water production modulus (water resources per unit area), water production coefficient (precipitation into water resources ratio), and runoff coefficient (precipitation into surface water resources ratio). The first two indicators reflect each region's per capita and per unit area of water resources. In contrast, the last two reflect the differences in meteorological and geological conditions in each city, which are related to the difficulty of water resources generation. In addition, the inflow coefficient and water storage per unit area are selected as indicators to reflect the inflow and water storage.

From the social value perspective, select indicators reflecting total water consumption and efficiency. Generally, the higher the level of economic development, the greater the water demand. And the more population, the more water demand. Therefore, two economic and social indicators, per capita GDP and population density, are selected to reflect the key factors affecting water demand. Two indicators reflecting water use efficiency are selected for comprehensive water use: per capita water consumption and water consumption per 10,000-yuan GDP. We select the proportion of urban water demand and daily water consumption of urban residents to reflect the two indicators of urban water efficiency.

From the perspective of ecological value, select indicators related to ecological protection. In terms of water resources management, reducing regional groundwater exploitation is an important part of ecological protection measures. Therefore, the groundwater exploitation rate is selected as an indicator to reflect the regional groundwater use. The ecological water consumption and farmland irrigation utilization coefficient are selected as the index of water resources input and agricultural water use efficiency to reflect regional ecological protection.

In the process of multi-attribute evaluation, the weight has an important influence on the evaluation result, and scientifically determining the weight of each index factor is of great significance to accurately evaluate the value of water resources. Due to the complexity of modern evaluation and decision-making problems, using a single method to determine the weight is unreasonable. Therefore, multiple methods should be used to comprehensively examine the relationship between various indicators and determine the weights of attributes. To avoid the deviation caused by the subjective weighting method and the absoluteness of the objective weighting method, determining the weight value in this paper combines the subjective judgment and the objective characteristics of the data itself. It adopts the analytic hierarchy process (AHP) and the entropy method to calculate, respectively. Finally, the average value of the weights determined by the two methods is taken as the final weight. The specific calculation process is shown in supplementary file S2.

Water resources system is a complex system affected by many factors. The water resources tax standard calculation is based on the value of water resources, so it is necessary to evaluate the value of water resources first.

Among them, V is the fuzzy comprehensive evaluation matrix of water resources value; A is the weight vector of the fuzzy comprehensive evaluation of water resources value; ‘’ is the composite operation symbol of the fuzzy matrix, and the weighted average operator is needed in the fuzzy comprehensive evaluation of water resources value. U is the evaluation membership matrix, and the specific determination method is shown in supplementary file S3.

The comprehensive evaluation index W is between 1 and 5, and the greater the index, the higher the value of water resources. Conversely, the lower the value of water resources. The multi-level evaluation of water resources can be carried out based on the above evaluation method. For each criterion layer, the weight of each index is used to synthesize the evaluation index of the criterion layer. Then the importance of each criterion layer and the evaluation index of the criterion layer are used to synthesize the comprehensive evaluation index of water resources.

The data on water resources, water supply, and water use in this study are from the ‘Water Resources Bulletin’ of significant provinces and cities in China from 2011 to 2020. Due to the sizeable inter-annual fluctuation of water resources, the multi-year average is adopted as the corresponding index value. The data on social and economic indicators such as population and GDP are from the ‘Statistical Yearbooks’ of provinces and cities from 2011 to 2020. In the case that the water consumption shows prominent time trend characteristics, such as the water consumption of 10,000-yuan GDP decreasing year by year. In that case, the 2020 value is the corresponding index value to reflect the latest situation. Otherwise, the multi-year average will be taken.

Firstly, according to the importance of each evaluation index and the differences among regions, this paper uses the AHP and entropy weight method to calculate the weight of each criterion layer and index (Table 1). Utilizing the fuzzy mathematics evaluation method, we calculate the resources, societal impact, ecological considerations, and a comprehensive evaluation index for water resources. Subsequently, we determine the water resources tax standard for each province based on its value orientation.

Water resources are characterized by scarcity (relative supply shortage), spatiotemporal (specific regional differences and time differences), versatility (diversity of functions and uses), and duality (pros and cons). Therefore, the attributes of water resources can be mainly divided into natural attributes, social attributes, and ecological attributes. Based on this, this paper divides the water resources value into resources, social value, and ecological value.

The water resources value evaluation index calculated by each index under the resources value criterion reflects each province's abundance and shortage degree of water resources. The higher the evaluation index, the scarcer the water resources in the region and the higher the value of water resources.

The evaluation index calculated by each index under the social value criterion reflects the dependence of each province on water resources demand in economic and social development. The higher the evaluation index is, the higher the demand for water resources (or the efficiency of water use needs to be improved), the more serious the constraints of water resources on economic and social development, and the more urgent it is to implement the policy of ‘determining people, production and city by water’.

The evaluation index calculated by each index under the ecological value criterion layer can reflect the utility of water resources in maintaining the regular operation of the ecological environment system in various regions. The higher the evaluation index is, the higher the effectiveness of water resources in maintaining the regular operation of the regional ecological environment system.

Specifically, the ecological value evaluation index of water resources in Qinghai is more significant than 4.0, which is a high ecological value area. The ecological value indexes of nine regions, including Shanxi, Guizhou, Anhui, Ningxia, Yunnan, Chongqing, Guangxi, Hubei, and Sichuan between 3.5 and 4.0, belonging to the regions with relatively high ecological value. The evaluation index of 11 regions, including Shaanxi, Jiangxi, Hunan, Hainan, Jilin, Fujian, Gansu, Henan, Inner Mongolia, Guangdong, and Liaoning, is between 3.0 and 3.5, belonging to regions with medium and high ecological values. The evaluation index of the other eight regions is less than 3.0, which belongs to the low ecological value area.

In addition, the comprehensive evaluation index of water resources value in Qinghai, Liaoning, Jilin, Shanghai, and Jiangsu is between 3.0 and 3.5, a medium to a high level. Among them, Qinghai and Jilin are mainly affected by the resources value of water resources. Liaoning, Shanghai, and Jiangsu are primarily influenced by the social value of water resources, which shows a gap between the supply and demand for water resources. In most other southern regions, the water resources value is generally low because of adequate water supply and weak water demand. In particular, Zhejiang, Hunan, Hubei, Hainan, Jiangxi, Anhui, and Chongqing have the lowest water resources value, and the evaluation index is between 2.0 and 2.5.

When the fuzzy comprehensive evaluation method is used to evaluate the value of water resources, the value evaluation's membership degree needs to be constructed first. At this time, each index is independent of the other. According to the actual value of the index, the evaluation value of the index under the fuzzy comprehensive evaluation standard is determined. Then the evaluation vector of water resources value is calculated according to the total weight of each index. Therefore, determining the membership matrix can explore the main contributing factors of water resources value and analyze the main influencing factors of value in various regions. This paper examines the main contributing factors of 10 regions with high water resources value whose comprehensive evaluation index is more significant than 3.5. And seven regions with low water resources value, whose comprehensive evaluation index is less than 2.5, as shown in Tables 2 and 3.

Through comprehensive comparison, it can be found that four indicators, including water production modulus, water yield coefficient, runoff coefficient, and groundwater exploitation ratio, are the main factors affecting the value of regional water resources. Among them, three indicators belong to the resources value criterion layer, indicating that the natural attributes of water resources have the most significant impact on the water resources value. In addition to the above four indicators, the main contributing factors of regions with high water resources value index are the inflow coefficient and water consumption per 10,000-yuan of GDP. The main contributing factors of regions with low water resources are per capita water resources and daily living water consumption of urban residents. It can be seen that the natural characteristics of water resources are the main factors affecting the water resources' value, and the water resources value can reflect the abundance and shortage of regional water resources.

The results show that the water resources tax in Inner Mongolia is the highest, 4.62 yuan/m³, mainly because Inner Mongolia is located in the Yellow River basin. Electric power, coal chemical industry, steel, and other related heavy industries and manufacturing industries are the sources of economic and social development in the autonomous region, which requires a large amount of water, resulting in an increasingly severe contradiction between the supply and demand of regional water resources. The second is Beijing, with a tax standard of 3.83 yuan/m³, mainly due to the water shortage in Beijing and the disposable income level of residents (second only to Shanghai). Followed by Liaoning, Shanghai, and Shanxi, the tax standard is between 3.00 and 3.50 yuan/m³, while other provinces' and cities' tax standards are lower than 3.00 yuan/m³. It has to be mentioned that although the comprehensive index of water resources value in Ningxia, Henan, and Hebei is at a high level because these regions are located in the Midwest regions of China, their economic development level is significantly lower than the eastern coastal areas. Residents' per capita disposable income is relatively low, so the tax standard is relatively low. Compared with the comprehensive evaluation index of water resources value, the distribution of water resources tax standard and value evaluation index is similar, and the distribution trend of ‘high in the north and low in the south’ is obvious.

The conflict arising from the shortage of water resources and the increasing demand for water resources has become one of the fundamental factors impeding the sustainable development of the social economy (Kong et al., 2021). Optimizing water resources allocation through economic leverage and promoting regional water conservation has gradually become an effective water resources management method (Wang et al., 2010). It has been 6 years since the water resources tax policy was implemented. Although it is only a pilot in 10 regions and has not been promoted nationwide, the successful experience of 10 pilot areas in China has proved that the water resources tax reform policy helps promote rational utilization and systematic governance of water resources in China (Ouyang et al., 2022). However, due to the public welfare nature of water resources, and its role as one of the basic elements in ensuring people's livelihood, it is difficult for the current water resources tax collection methods and tax standards to form effective incentives and constraints on urban residential water (Zhang, 2020). Therefore, regions should adjust urban water resources tax according to local water resources and income levels to reflect water resources' scarcity and intrinsic value and guide the efficient and rational use of water resources (Zhu & Shi, 2018).

The calculation results of this paper can not only effectively illustrate the economic significance of collecting water resources tax, but also solve practical problems in formulating taxation in various regions. On the one hand, regional differences necessitate that government departments cannot implement a unified tax standard when collecting water resources tax. Based on the calculation design of this study, local governments can set differentiated tax standards and progressive tax systems that reflect water conditions in different areas. At the same time, for water shortage areas with water shortage, the scientific calculation of the water resources tax standard can accurately ensure the primary water demand and further function as the economic leverage of taxation to improve regional water resources efficiency. On the other hand, it has the characteristics of dynamic adjustment, and the tax standard in the calculation results only reflects the overall standard of specific water use types in a certain area at a particular time. With the development of the economy and society, policy-makers should consider the total supply of water resources, water abundance, and other factors to timely adjust the basis of taxation (Wu et al., 2023a).

The research results of this paper can also be applied to the agricultural and industrial sectors. The intrinsic value of water resources in the same region is the same. However, agriculture and industry, as more important water sectors, are more sensitive to water resources tax collection than urban residents. Therefore, for the agricultural sector and the industrial sector, it is necessary to consider the difference in their tax-bearing capacities of water resources based on the comprehensive evaluation of water resources and levy a reasonable water resources tax rate to improve their water-saving awareness and promote water-saving without affecting their production. Taking the agricultural sector as an example, it can be adjusted by changing the agricultural affordability index. We may use the proportion of agricultural water expenditure to the average output value per mu as 5–10%, or the proportion of agricultural water expenditure to the average agricultural net income per mu as 10–13% as the basis for measuring the affordability of agricultural water (Wu et al., 2023b). At the same time, in the calculation of water resources taxation within the agricultural sectors, it is possible that certain data may not be collected with absolute accuracy. In such cases, the utilization of interpolation methods can be employed to facilitate more precise calculations (Zhu & Lai, 2022).

Regarding the current collection and management mode of water resources tax in pilot areas, most regions have not clearly stipulated the water resources tax collection and management mode, and each pilot area regards urban water-supplying enterprises as taxpayers and collects water resources tax in the water intake link. Hebei, Tianjin, Shandong, and Sichuan are levying price tax on the water link. In Beijing, Shanxi, Inner Mongolia, Henan, Shaanxi, and Ningxia, extra-price taxes are levied on the sale of water. This tax collection and management model transfers the water resources tax that residents should bear to urban water supply enterprises. On the one hand, this method simplifies the work of the tax department in collecting taxes; on the other hand, because the water supply unit is treated as a taxpayer and the water resources tax is levied according to the water intake of the water supply unit, the water supply unit is forced to improve the technology and management to a certain extent, that reduces the leakage of water resources in the process of water transmission, which ultimately results in reduction of the cost loss of the enterprise and improvement of the transportation efficiency of water resources (Li et al., 2019). However, this method also increases the operating burden of water supply units to a certain extent. Also, water users are not aware of the importance of water conservation because they do not pay taxes, and implementing water resources tax reform policy has little effect on domestic water use (Guo et al., 2019). Therefore, water-supplying enterprises can appropriately increase the water price through the price mechanism to restrain the water use behavior of end users and improve their water use efficiency to achieve the goal of water saving.

For urban residents, water is the primary support for human survival, and the price mechanism cannot affect water consumption related to basic survival needs (Zhang, 2022). Therefore, the ladder water price can be used for reference in collecting water resources tax. When residents use water at ‘the first step’ (to meet the primary living water demand), water resources tax is not levied or even exempted. A water tax is levied when water consumption exceeds ‘the first step’. This tax collection mode can ensure the primary water demand of residents and at the same time enhance the legitimacy of water resources tax collection and the public approval of water resources fee to tax. This study uses the model to calculate various regions' water resources tax standards. The water resources benchmark tax standard is a collection of regional water resources' value, use structure, and characteristics and is primarily based on the affordable cost of water users. Water resources tax that is progressively determined based on this tax standard can realize its regulatory role to fulfill its water-saving benefits.

This paper mainly evaluates the resource, social, ecological, and comprehensive value of water resources through the fuzzy comprehensive evaluation model. It explores the spatial distribution of water resources value in China. On this basis, the value-oriented water resources tax standard for urban residents in various regions in China is calculated. The study found that: (1) the spatial distribution of water resources value in China shows a trend of ‘high in the north and low in the south’. To be more specific: the value of resources is closely related to the natural characteristics of water resources, and the value of resources in the northern region is generally higher than that in the southern region; social value has a certain correlation with the level of economic development, but it also has a certain correlation with regional water-saving awareness and technical level. Ecological value, similar to its social value, does not exhibit an obvious spatial distribution trend. (2) The actual water resources tax in China's pilot areas is quite different from the calculation results, and it is difficult to produce water-saving incentives. The water resources tax standard is guided by the value of water resources and calculated by comprehensively considering the tax and fee affordability of urban residents' water resources, annual disposable income, and water consumption can not only fully reflect the value of regional water resources but also maximize the positive policy effect of water resources tax on the premise of ensuring people's livelihood. (3) In order to reflect the public welfare of water resources, the water resources tax should not be levied and should be even exempted to protect the water consumption of residents' normal life; the water resources tax should be levied on the part exceeding the basic domestic water consumption.

This work was supported by the National Social Science Fund Project (Grant No. 17ZDA064).

All relevant data are included in the paper or its Supplementary Information.

The authors declare there is no conflict.