China Explains Proposed Reform Of Fuel Tax

by Mary Swire, Tax-News.com, Hong Kong

09 December 2008

Chinese officials have spoken further about the details of the forthcoming fuel tax reform, dismissing suggestions that the increase will subsequently result in higher pump prices.

The reform – which will come into effect on January 1, 2009 – will see the current six-fee regime which individuals are required to pay replaced with a single fuel consumption tax that will increase gasoline taxes by USD0.03 per litre. Diesel will be raised by around USD0.10 cents per litre.

Concerns have been lodged by individuals that these increases will directly result in a rise in pump prices. However, the government made an announcement on December 5, assuring the country's drivers that the tax is reflected in pump prices, and it will not result in an increase for consumers.

Further to this, the government has announced that it will cap pump prices, so that consumers are not continually affected by future increases to the rate of fuel tax.

Once the reform goes ahead, China will have a lower rate of fuel tax than neighboring countries, and even the European Union.

However, the government has noted that commercial industries throughout the country requiring fuel - such as taxi drivers, public transport and the agricultural sector - will all experience a rate increase.

Recommended