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China coal provinces set resource tax rates

Date:23/01/2015   View: 986   Tags: China Coal Resource tax rates
Most of China’s coal-producing provinces have set the resource tax rates for the fossil fuel, with the highest at 9% in Inner Mongolia, while the impact on miners’ cost would depend on price levels in the market.

As of January 22, 24 provinces and cities had gained central government approval for their own coal resource tax, which was set between 2% and 9% of the sales value of raw coal, as well as washed products with a conversion rate.

The reform on coal resource tax to value-based from volume-based is part of the Chinese government’s effort to streamline the tax system that came in a time that coal prices are in multi-year lows, potentially limited the impact on coal miners.

Major coal-producing provinces including Inner Mongolia, Shanxi and Shaanxi have set the resource tax rate at the higher end of the tax range specified by central government, in order to offset the decrease in revenues caused by the removal of relevant charges and fees, sources said.

While, provinces that mainly buy coal from other provinces have set it at the lower end of the tax range, partly due to their less reliance on revenues from the coal sector.

Despite relatively high output, provinces like Henan and Jiangxi set the rate low at 2%, in a bid to balance miners’ higher mining cost.

Thermal coal miners could see a decline in cost under the new resource tax, due to relatively low prices, while it would be hard for coking coal producers to taste the joy as their products are sold at a higher price.

One Inner Mongolia-based large miner said the new tax would have little impact on its profits, as the increase in tax cost would be offset by the scrapping of some fees and funds.

However, in provinces where the eliminated local government charges can’t cover the tax increase, miners would have to bear the additional cost, further weakening their competitiveness in the oversupplied domestic market.

One Shaanxi-based producer source said the overall cost will increase slightly, as they need to pay 16.8 yuan/t resource tax for 5,200 Kcal/kg NAR coal priced at 280 yuan/t, while the cancelation of several local government charges only helped cut cost by about 10 yuan/t.

Since more government charges and fees yet to be removed, the resource tax would weigh on miners’ bottom line over the medium to long term, insiders said.


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