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New Resource Tax Regulations May Come out Soon

A blueprint for the new round of resource tax reform has been submitted to China's State Council, a source close to the issue said yesterday, adding that the collection method will be based on prices instead of quantity.

"The reform plan may be announced soon, but I'm not sure about the exact time," the source said.

The resource tax is intended to adjust product profits and charge for use of State-owned resources. The taxable resource items now include crude oil, natural gas, coal, non-metal mines, black mines, non-ferrous metal mines, and salt.

The reform plan proposes a shift from the current resource tax system based on the quantity of crude oil, natural gas and coal to a new system that considers account their value, according to the source. Under the plan, mineral water will also become taxable.

The resource tax reform will boost the prices of resource products, and further those of raw materials. However, experts agreed that although the reform may theoretically result in temporary commodity price growth, it will not significantly impact the consumer price index.

The reform aims to maintain the sustainable development of the Chinese economy and strengthen energy conservation and emission reduction, experts noted.

Prices of non-ferrous metal products will not go higher on the tax reform, said Shi Weiping, non-ferrous metal analyst at Orient Securities Co. Tax cost need not to be taken into account as non-ferrous metals prices fluctuate with the international market. Tax rate increases may narrow company profit margins but will not change the supply and demand.

(China Daily November 2, 2007)

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