wednesday, 28 august of 2019


China lawmakers approve new law allowing local governments to tax resources

Chinese legislators have approved a law that will give local governments the authority to tax as many as 164 resources, including fossil fuels, minerals and eventually water, the Ministry of Finance said.

The National People’s Congress, China’s top legislature, approved the resource tax law, which would take effect in September next year, the ministry said.

Officials said it would not raise the overall taxes on local companies.

Major resources such as crude oil or rare earths would remain subject to a fixed tax rate set by the central government, but local authorities would be able to adjust the rates levied on other products, said Xu Guoqiao, a senior inspector with the taxation department at the Ministry of Finance.

The law will enable authorities to provide tax relief for depleted, low-grade mines or regions that have suffered natural disasters. It would also allow tax exemptions to be applied to help policy strategies such as the development of coal-bed methane, Xu said.

It would lay the groundwork for a nationwide water resource tax designed to encourage efficiency and conservation, he said. China began levying a pilot water resource tax in heavily polluted northern Hebei province in 2016.

Local authorities will be granted powers to levy higher rates of tax in regions where water resources are scarce, but Xu said it would not raise the overall taxes paid.

"It will mainly strengthen the water conservation awareness of taxpayers, prevent the over-exploitation of groundwater and force high-consuming enterprises to save water and improve efficiency," he said.

China’s resource tax reforms were introduced for products such as crude oil, natural gas and coal in 2011 and extended to other commodities in 2016.

Chinese firms were previously charged on the basis of how much of a resource they used, but the new tax system is based on price rather than volume.

Under the new law, Chinese and foreign firms jointly exploring for oil and gas in onshore and offshore oil and gas blocks would continue to pay only royalties for contracts that were signed before November 1, 2011, the official China News Service said on Monday.

But they would have to start paying the resource tax once the contract expired, the report said.

(Published by South China Morning Post, August 26 2019)

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