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China Accelerates Resource Tax Reform

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

31 August 2016


China has confirmed that a new system of taxing natural resources, which had been operating on a pilot basis, has been extended.

Under the reforms, China is switching the basis of taxation of natural resources from a volume-based system to an ad-valorem system (based on value).

The Chinese Government first extended nationwide the new resource tax in November 2011. Since then, the taxation of such resources as crude oil and natural gas, coal, and rare earths have been changed.

Currently seven kinds of resources are subject to resource tax: crude oil, natural gas, coal, other crude non-metal ores, crude ferrous metal ores, crude non-ferrous metal ores, and salt. According to an August 29 English translation of an announcement originally made on June 27, 2016, the Government began rolling out the resource tax reform "in an all-round way" on July 1, 2016.

The release also confirmed that "efforts will be made to pilot the collection of resource tax on water on an ad-valorem basis."

The Government believes that the resource tax reform, when fully implemented, will improve the pricing mechanism of resource products by taking account of the differences between China's producing regions; promote coordinated and enhanced regional development; and enable the conservation and environmental exploitation of resources.

It is intended that the resource tax rates imposed should take account of the economics involved in the production of each mineral, so that the overall tax burden on producing companies should not be increased.

According to the State Administration for Taxation, resource tax revenue has grown at an annual average of 27 percent since the tax was introduced, to reach RMB103.5bn (USD15.5bn) in 2015, representing 1.8 percent of local tax revenues.

TAGS: environment | tax | economics | China | tax rates | tax reform | Tax

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