New Tax Reforms on China's Oil and Gas
Taxes levied on China's energy industries may be as high as 10%
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Mongolian coal mine Image: HerryLawford |
In an effort to speed the development of China's poorer western regions, the State Council will introduce new taxes of up to 10% of the sales value of oil and natural gas. The new reform is an expansion of pilot scheme introduced by Premier Wen Jiabao in June 2010, whereby producers in Xinjiang Uygur autonomous region had to pay a 5% ad valorem sales tax on crude and gas.
Although the timeline for full implementation is unclear, the government has said it will apply the policy in 12 of China's poorer provinces, including Gansu and Inner Mongolia.
The new policy also affects coal and rare earth sales, although insiders say the adjustments made in these sectors will not have as great of an impact. Coal will still be taxed by volume rather than sales price, and will be raised to 0.3 to 8 yuan from 0.3 to 5 yuan per ton.
Industry analysts say that the due to the decreasing price of international oil, businesses heavily reliant on oil will be affected less than those with a high natural gas consumption.
