New resources tax plan to triple cut on coal sales
Beijing is expected to triple the resources tax on coal and may also raise the levy on other minerals as part of its efforts to slow exploitation of the country's natural resources, a government official said.
A proposal on the new resources tax had been submitted to the State Council, China Business News reported yesterday, citing lawmaker Sun Youhai.
Mr Sun, who heads the legislative office of environment protection, said the proposal was taking advice from related departments, and that the tax on coal would be raised to 3 per cent of sales value from 1 per cent.
Spokesmen for China Coal Energy and Yanzhou Coal Mining said they had not heard or received any documents regarding the changes in the tax, adding that any increases would be passed on to customers.
Mainland coal producers and power generators have started talks on coal prices for next year, which are expected to rise as much as 10 to 20 per cent due to tight supply and railway bottleneck.
The tax increase would shave 6 per cent off the profit of coal producers based on their operating figures, but the real impact would be much smaller since they could pass on most of the additional cost to buyers, such as power plants, steel mills and cement makers, said JP Morgan analyst Zhang Feng.
JP Morgan said there was a lot of room for mainland coal producers to raise prices to domestic consumers as demand and international prices were rising. South Korean utilities were forced to accept a contract price of US$73 per tonne from mainland coal miners, excluding delivery cost and insurance, after they rejected the initial US$67 a tonne.
Beijing has indicated for a long time it plans to revise the resources tax, which it considers too low. Some media report suggested the tax rate might be doubled and would be accompanied by a shift from the volume-based levy to a price-based system to benefit from higher resources prices.
At present, the government charges the taxes on each tonne of output regardless of the selling prices.
As such, coal firms last year paid 1 per cent of their revenue last year, while others paid less. For example, Zijin Mining Group's resources-tax payment was 0.37 per cent of its revenue last year.