Debate rages over oil tax system reform

• Source: Global Times
• [02:42 November 27 2009]
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By Chen Xiaomin

Some analysts argue China should revamp its quantity-based resource tax system for oil while consumer and production indices remain low, yet others fear hikes will get passed onto the buyers.

Resource taxes have been levied on oil, as well as salt and other minerals such as natural gas and coal, by quantity since 1993 in an apparent attempt to encourage efficient development and use of the country's resources. The resource taxes for oil was set at 8 to 30 yuan ($1.17-$4.39) per ton and has stayed almost unchanged since.

Analysts believe resource taxes for oil should be in line with global price changes. It is unreasonable to collect the same amount of tax from oil producers especially if their profits have grown over the past 16 years, said Li Chaolin, an independent energy analyst.

Global crude oil price climbed from less than $15 per barrel in 1993 to reach $147.27 at its highest point in 2008, only to drop to the present $80, still six times that of 16 years ago. The oil price is expected to break the $100 mark in 2012. However, resource taxes for oil were raised only once in the past 16 years when the lowest tax was elevated to 10 yuan ($1.46) per ton in 2005.

But debate over the reforms has already pushed the government to rethink the system.

Some officials proposed to levy oil resource tax by value with a 10 percent tax rate at the National People's Congress last year.

The National Development and Reform Commission said this May it will unveil a re-source tax reform this year, and it was reported by the Oriental Morning Post in July as saying it had submitted the reform plan to the State Council.