Mon, December 08, 2008
Business > Markets > China ready to levy fuel tax

China to kick-start fuel tax reform on Jan 1

2008-12-05 10:58:15 GMT2008-12-05 18:58:15 (Beijing Time)  Xinhua English

BEIJING, Dec. 5 (Xinhua) -- Chinese drivers will no longer have to pay road maintenance fees as the New Year begins but have to pay a hiked gasoline tax. But when they drive to gas station, they will find they don't have to dig deeper into their pockets.

That's what the government promised in a draft scheme on fuel taxation and reform of the country's refined oil pricing mechanism, released on Friday evening to solicit public opinion.

The scheme, scheduled to be put into effect on Jan. 1, 2009, will annul six types of fees on road and waterway maintenance and management. Meantime, it will raise the gasoline tax from the current 0.2 yuan per liter to one yuan and diesel tax from 0.1 yuan per liter to 0.8 yuan.

The country's existing fuel prices will not be further raised because of the reform, said the draft scheme jointly released by the National Development and Reform Commission, Ministry of Finance, Ministry of Transport and State Administration of Taxation.

The four ministries said the reform on fuel taxation and oil pricing "is aimed at facilitating energy saving and emission cut as well as the economic structural adjustment."

Other guidelines of the reform included regulating toll collection and raising funds to build and maintain infrastructure, said the draft.

LINK TO GLOBAL PRICE

The draft document said China's onshore crude oil prices should be directly in line with prices on the international market. Refined oil prices, however, should be indirectly linked to global oil prices.

Under the new system, "pricing of domestic refined oil prices should not only reflect fluctuations of international oil prices and production cost, but also take into account domestic oil supply and demand," it said.

In the retail sector, the draft also said fuel would be sold at set ceiling prices, which would be based on producer prices. The government will retain "an appropriate control" over the fuel price.

China has been pushing for fuel tax reform for many years. Both government officials and scholars have been saying that the oil price plunge on the international market is presenting a perfect opportunity for China kick start it. The world crude oil price has plunged almost 70 percent from the peak 147 U.S. dollars per barrel in mid-July.

Even with oil prices tumbled to below 50 dollars a barrel, Chinese drivers are paying much more than those in many other countries because domestic fuel price has been unchanged since June.

The government said that the tax revenues would be used to cover expenditure on road and waterway maintenance and management, subsidize the losses of local governments due to the abolishment of road tolls and support farmers and disadvantaged people affected by the reform.

The public may raise their opinions by letter, fax or email from Dec. 5 to Dec. 12, said the four ministries in a press release.

The State Council, or the Cabinet, had discussed the reform plans of oil pricing mechanism last week, and decided to make public the draft reform plan to solicit public advice.  

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