The reformation of China's resource tax is expected to bring about multiple benefits both in terms of environmental protection and boosted fiscal revenues for local governments, analysts said.
The State Council, or China's cabinet, announced Monday that starting from Nov. 1, resource taxes on domestic sales of crude oil and natural gas will be extended from a few of the country's regions to the entire nation.
After the adjustments, sales-based tax rates for oil and natural gas will also be raised to an amount between 5 and 10 percent, up from the previous 5 percent implemented in northwest China's Xinjiang Uyghur Autonomous Region on June 1, 2010. The sales-based resource tax for oil and gas was extended to 11 other provinces in December last year.
The cabinet announcement stated that the list of taxable resources includes crude oil, natural gas, coal, metallic ore, ferrous metals, non-ferrous metals and salt.
With the exception of oil and gas, the resources will remain taxed based on production volume, although rates for rare earth and coking coal will be adjusted.
The new regulations impose a sales tax ranging from eight (US$1.25) to 20 yuan per metric ton on coking coal and from 0.40 to 60 yuan per metric ton on rare earth ore.
"Coking coal is a scarce resource, while rare earth is a strategically important resource. Global demand for these two resources is huge, but the threshold for exploring these materials is low at home," said Liu Shangxi, an official with the Ministry of Finance.
"The tax rate adjustments will better reflect the scarcity of these materials and help curb blind exploration," Liu said.
The broader taxation coverage and higher taxes for some valuable materials are in line with the nation's efforts to save energy and reduce emissions, according to Zhang Bin, a researcher with the Chinese Academy of Social Sciences.
Zhang said that since the resource tax is a regional taxation item, the adjustments will help to boost the fiscal revenues of local governments.
An official with the State Administration of Taxation said that because China's oil and gas resources are relatively richer in the central and western regions, the sales-based taxes will also contribute to balancing the nation's regional economic development.
However, the official said that a resource tax based on production volume cannot closely follow price changes; therefore, it is less effective in terms of redistributing social wealth.
Under the new adjustments, the tax rate for other non-ferrous metals will be set between 0.4 to 30 yuan per metric ton. Ferrous metals will be taxed at two to 30 yuan per metric ton.
Taxes on precious non-metallic ore will fall between 0.5 to 20 yuan per kg or per carat, while taxes on cheap non-metallic ore have been set between 0.5 to 20 yuan per metric or per cubic meter.