Resource taxes are likely to be collected on the basis of price
instead of quantity, revealed Wang Min, Vice Minister of Land and
Resources, during an international conference held in Beijing
Tuesday. Enterprises with high consumption of crude oil, coal, and
non-ferrous ores would be most affected, the Oriental Morning
Post reported on November 14, 2007.
A blueprint for the new resource tax reform is now under
discussion and will soon be submitted to the State Council for
examination and approval. The exact time for the announcement of
the new tax has yet to be released.
"I expect the new tax rate to stay around 3 percent," said a
Beijing-based TX Investment Consulting analyst. "Most people
predict the rate will range between 3 and 5 percent. But I think it
won't be too high, for that will accelerate inflation in
China."
The resource tax is imposed on enterprises as a charge for their
use of State-owned resources. Ores, forests, grasslands, waters,
and lands all belong to natural resources, but current taxable
items only include crude oil, natural gas, coal, non-metal ores,
ferrous ores, non-ferrous ores and salt.
Some specialists have already pointed out deficiencies in the
old resource tax system. For one thing, the tax is only imposed on
ores and salts, thus unable to promote the rational use of
resources of all sorts. Additionally, the low tax rate leads to a
low cost of production. This will be a bane to the country's
transformation from extensive economic growth to an intensive
one.
According to Hu Yijian, professor at Shanghai University of
Finance and Economics, the new price-based taxation method will
help the country save resources and increase government
revenues.
However, market observers responded differently to this news.
Some feared the new taxation method might lead to a rise in
production costs and a drop in enterprises' profitability, while
the others believed listed enterprises would not be deeply affected
in the long run for they could adjust pricing strategy to cover the
rising cost. Most people now worry that the tax reform will result
in another round of price hikes.
In 2006, China's consumer price index (CPI), a main gauge of
inflation, increased 1.5 percent over the previous year. In 2007,
the figure soared up to 4.8 percent and next year, it is estimated
to remain at 4.3 percent. How to effectively combat inflation
becomes a major concern of China's policy makers.
"Given the current inflation rate, choosing the best time to
announce the new tax is of vital importance to the maintenance of
market stability," said the analyst. After the fuel price surged on
November 1, any further price rise in raw materials will put the
country under greater pressure of inflation.
(China.org.cn by Chen Xia, November 16, 2007)