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China Levies Resource Tax On Rare Earths

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

01 May 2015


China's Ministry of Finance has confirmed the rates of resource tax to be imposed on rare earths, tungsten, and molybdenum production with effect from May 1, 2015, replacing the export quotas and duties that had previously been eliminated in conformity with last year's World Trade Organization (WTO) ruling.

China's State Council executive meeting on April 28 had approved the introduction of resource tax, based not on quantity but on sales value. The Ministry, in an April 30 notice, then indicated that the tax rate on light earths ranges from 7.5 percent to 11.5 percent dependent on the region of production; on heavy earths it is 27 percent; and on tungsten and molybdenum it is 6.5 percent and 11 percent, respectively.

China has typically extracted up to 90 percent of the world's available rare earths, which have a wide range of uses in advanced electronic and environmental goods. Japan, the European Union, and the United States launched a WTO dispute settlement case in March 2012 against China's rare earth export quota and duty restrictions, which were said to have created serious disadvantages for foreign industries by artificially increasing China's export prices.

In August last year, after the WTO found that its export restrictions were in breach of trade rules, China dropped its rare earth export quotas from January 1 this year and its export duties of between 15 percent and 25 percent from May 1.

The imposition of resource tax as a replacement will conform with WTO rules, as domestic rare earth users will now be subject to the same taxation as foreign buyers, but it will also keep China's rare earth export prices high. China has, however, always justified its policies on the basis of environmental protection and conservation policy considerations.

TAGS: environment | tax | mining | export duty | World Trade Organisation (WTO) | China | extraction tax | tax rates | trade

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