China proposes 10% tax on crude, urges fuel tax

BEIJING, Dec 18 (Reuters) – China’s Finance Ministry said on Tuesday it has proposed introducing a 10 percent tax on crude oil production, which would be phased in at a 5 percent rate initially.

This tax would help compensate local governments for the extraction of crude oil and would benefit the environment, Vice Minister Zhu Zhigang said in a statement published on the ministry’s Web site www.mof.gov.cn.


Industry analysts said the move was largely expected and had already been priced into the Chinese market.
The ministry did not specify when the tax would become effective, saying it “should be imposed as soon as possible”.
Gordon Kwan, China energy analyst at CLSA in Hong Kong, said market rumours about a possible resource tax had been circulating for a while.

“This shouldn’t be a big surprise,” he said.

“Overall China’s taxation is still lower than in Indonesia, Venezuela or Russia,” he added, referring to other oil producers.

The resource tax, which the ministry said would also cover geothermal energy and mineral water production, would be charged on the basis of prices rather than volume.

Reuters