Mining Taxation may be Reformed in China

Mining Taxation may be Reformed in China

Shanghai, China (prHWY.com) May 9, 2012 - The mining tax is best known as the resource super profits tax, or RSPT. It is designed to replace the confusing array of royalties that mining companies presently pay to the states. Any profit made by mining companies that is above 6% of their capital investment would be taxed at 40%, and all royalties presently paid to the states would be rebated.

A proposal to introduce a tax on the consumption of coal, oil and gas was tabled at the annual meeting of the National Energy Administration (NEA) yesterday.

The meeting also confirmed that recent changes to tax the production of oil and gas based on value rather than volume will be extended to coal production, although no timescale was given, according to a report by China Business News. More bands of taxation will also be introduced to encourage producers to maximize the extraction of resources.

Presently, mining companies pay royalties to the states which vary depending on the mineral being mined. While the cost of minerals has skyrocketed on the world market, these royalty payments have not risen anywhere near as quickly. In 2001, mining companies paid approximately 40% of their profits as royalties to the state governments. Today they pay less than 20%. Clearly, there is a strong argument that the Australian people deserve to receive a greater share of today's profits and that's where the new mining tax comes in.

Last November saw the introduction of a value-based tax on the production of oil and gas, set at 5 percent. Based on current prices, the move effectively increased the tax burden on oil producers by as much as a factor of 20.vibrating screen:http://www.hx-crusher.com/vibrating_screen.html
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However, coal production is still taxed based on volume. Industry watchers have pointed out making the switch to a value-based tax for the sector is trickier, as the country depends on coal for as much as 80 percent of its energy production, and prices have been climbing sharply.

The reforms on both the production and consumption side are part of the government's plan to increase efficiency in the use of resources and energy production. At present, no consumption tax is charged.

'Such a consumption tax is long overdue,' Lin Boqiang, the director of the China Center for Energy Economics Research at Xiamen University, told the Global Times yesterday. 'The resource production tax changes have already begun to take effect, and now it's time to tax consumption of ball mill. Both will serve to increase the cost of energy products and demonstrate the government's determination to increase energy efficiency throughout the 12th Five-Year Plan period.'

Economic modeling by the Treasury as well as independent modeling by KPMG has found that the mining tax would see the average worker gain about $450 a year, due to the flow-on results of cuts in company tax and tax breaks for small businesses of dryer machine. The inflation rate would drop by 1.1% which would, in turn, ease the pressure on interest rates and finally, Australia's gross domestic product (GDP) would rise by 0.7%.

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