China plans to impose a resource tax of up to 10 percent on
crude oil production "soon" and introduce a long-debated fuel tax
at an "appropriate time," says the Ministry of Finance.
The tax on oil production will start at five percent and be
doubled later. The rate will be based on oil prices and replace an
existing levy based on volume, Vice Finance Minister Zhu Zhigang
said on the ministry's website.
Zhu didn't specify a timetable to impose the resource tax, which
will also cover geothermal heat and mineral water production.
The tax will be distributed to local governments to compensate
for the extraction of oil, benefiting resource-rich provinces and
the environment, Zhu said.
The levy is set to significantly reduce revenues of oil firms
like PetroChina Co and Sinopec Corp, but their share prices could
be little affected as higher resources taxes are widely expected
and have already been factored into valuations of the stocks, said
Gordon Kwan, head of China energy research at CLSA.
"The government may increase subsidies to the nation's ailing
refining sector and speed up reform in the refined oil-pricing
system after collecting the tax," said China Merchants Securities
analyst Qiu Xiaofeng. "So the tax may not necessarily be negative
to oil firms in the long term."
"Higher taxes will be passed on to consumer goods, putting
upward pressure on inflation," warned an analyst at TX Investment
Consulting.
China's oil firms are subject to a special upstream tax levy,
which is assessed at between 20 and 40 percent of the portion of
the price over US$40 a barrel. Today, crude trades above US$90 a
barrel.
Zhu also said China will choose an "appropriate time" to launch
a fuel tax which could greatly increase petrol costs for motorists,
to replace road tolls and maintenance charges.
China has long been considering a fuel tax on sales, but the
scheme has been delayed over the years as oil prices and inflation
soar.
"The time is ripe to impose it now," Zhu said.
(Shanghai Daily December 20, 2007)
