China Plans to Alter Resource Tax Structure

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May 24 – China plans to alter the tax structure on the profits made off energy products according to a work conference last Thursday in Xinjiang.

The new structure, which will first be tested in a pilot program in the province, will consider resource prices as a factor when levying taxes, compared to the current structure which is based on the actual output. Initial predictions suggest that the tax rate is likely to be 3 percent to 5 percent for resource products.

“It may still be two to three years before the government would be able to implement the reforms nationally,” said Lin Boqiang, director of the Energy Economics Research Center at Xiamen University.

Officials and analysts expect the reformed tax structure would focus on raising the tax rate and expanding the scope of resource products, such as minerals, land, plants and water in addition to oil and gas.

The government may also include other eligible provinces and regions for the early trial program, such as Shanxi Province and the Inner Mongolia autonomous region, which boast an abundance of natural resources. It suggests that the new tax reform will improve the efficiency of natural resource extraction and protect the environment, but also will increase the cost of resource products and could potentially lead to price hikes.