China is considering plans to expand a new resource tax mechanism across its 12 western provinces, as Beijing attempts to redistribute wealth to the country's poorer regions.
China will start taxing coal, oil and natural gas extracted in the region by volume instead of value, said premier Wen Jiabao at a government-organised conference this week. The move will help convert the area's abundant natural resources into economic benefits, he said.
Beijing has already rolled out a new resource tax mechanism last month in the western province of Xinjiang. The pilot scheme levied a 5pc tax on the value of crude oil and natural gas extracted in the province, but did not extend it to coal. The gas resource tax will be 62 yuan/'000m ($9.14'000m ) at the new price and oil will incur a $3.50/bl tax at $70/bl, for example. Taxes were Yn14-30/t for crude and Yn7-15/'000m for natural gas under the previous scheme. The rest of China continues to tax resources by volume.
A region-wide expansion of the new tax will provide a major windfall to local governments since revenue from the scheme will be collected at a provincial rather than national level. But is likely to have a significant impact on the earnings of major state-owned resource companies, including state-owned oil and gas producers PetroChina and Sinopec and coal miner Shenhua, because they will be less able to pass increased costs on to consumers.
The tax revision is part of Beijing's decade-old programme to bring China's impoverished western provinces in line with the country's booming coastal areas. Violent ethnic unrest in Xinjiang last year and broader concerns about social stability have given the project renewed impetus in recent months.
China's western regions, as defined by Beijing, encompasses Xinjiang, Tibet, Qinghai, Inner Mongolia, Ningxia, Shaanxi, Guizhou, Guangxi, Yunnan and Sichuan provinces, as well as the municipality of Chongqing. The area accounted for 28pc, 80pc and 48pc of the country's total oil, natural gas and coal output respectively last year.
China will start taxing coal, oil and natural gas extracted in the region by volume instead of value, said premier Wen Jiabao at a government-organised conference this week. The move will help convert the area's abundant natural resources into economic benefits, he said.
Beijing has already rolled out a new resource tax mechanism last month in the western province of Xinjiang. The pilot scheme levied a 5pc tax on the value of crude oil and natural gas extracted in the province, but did not extend it to coal. The gas resource tax will be 62 yuan/'000m ($9.14'000m ) at the new price and oil will incur a $3.50/bl tax at $70/bl, for example. Taxes were Yn14-30/t for crude and Yn7-15/'000m for natural gas under the previous scheme. The rest of China continues to tax resources by volume.
A region-wide expansion of the new tax will provide a major windfall to local governments since revenue from the scheme will be collected at a provincial rather than national level. But is likely to have a significant impact on the earnings of major state-owned resource companies, including state-owned oil and gas producers PetroChina and Sinopec and coal miner Shenhua, because they will be less able to pass increased costs on to consumers.
The tax revision is part of Beijing's decade-old programme to bring China's impoverished western provinces in line with the country's booming coastal areas. Violent ethnic unrest in Xinjiang last year and broader concerns about social stability have given the project renewed impetus in recent months.
China's western regions, as defined by Beijing, encompasses Xinjiang, Tibet, Qinghai, Inner Mongolia, Ningxia, Shaanxi, Guizhou, Guangxi, Yunnan and Sichuan provinces, as well as the municipality of Chongqing. The area accounted for 28pc, 80pc and 48pc of the country's total oil, natural gas and coal output respectively last year.
