China takes oil, gas sales tax nationwide

October 11, 2011 | 15:00

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China has said it will roll out a tax on crude oil and natural gas sales nationwide from next month as Beijing looks to save energy and cut emissions, while doubling the maximum levy on rare earth metals.

The tax on domestic sales of crude oil and natural gas, first trialled in the far-western Xinjiang region and later extended to nearby areas, will go national from November 1, China's State Council, or cabinet, said Monday.

The sales tax -- currently ranging from five to 10 per cent -- will be widened to include other resources such as rare earths and coking coal, which is used largely in steel production, "when the conditions are ripe", the statement said.

But the move will have limited impact on inflation as suppliers will not be able to raise household gas and fuel prices, which are still tightly controlled by the government.

Resources other than oil and gas are currently taxed on the volume of production, not value, preventing local authorities from benefiting from soaring commodity prices.

The government said it would double the maximum tax rate on rare earths -- 17 elements crucial to making many high-tech products -- to 60 yuan ($9.40) per tonne from 30 yuan, describing them as "an important strategic resource".

China produces more than 95 per cent of the world's rare earths and has angered trade partners by restricting exports and sending prices of the metals skyrocketing.

The sales tax on crude oil and natural gas sales has boosted revenues for local governments since the trial began in June 2010 and "improved peoples' livelihoods and protection of the environment", the statement said.

AFP

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