China To Consider Increasing Windfall Tax on Oil Gains

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May 16 – The government is looking into increasing the threshold for windfall tax levy on gains from crude oil, according to sources.

“The government said the levy would be reconsidered when oil is above US$80 a barrel,” PetroChina Chairman Jiang Jiemin was quoted by Shanghai Daily as saying during the company’s annual general meeting in Beijing. “Now oil is well above US$100 a barrel.”

According to Hu Weiping, oil and gas director at the National Development and Reform Commission, the current tax trigger level is too low. The present level for special oil gain levy is US$40 dollars per barrel.

Raising threshold of windfall tax, or special oil gain levy, would be positive for the company’s profitability, Jiang told Xinhua.

In 2006, China began to levy windfall tax on crude oil as a bid to correct its pricing of refined oil products and set local price closely to the international market while allowing subsidies for those affected by the price hike.

Jiang added, the government would not be likely to raise domestic oil prices in the short term as the consumer price index (CPI) was still steep.