China ready to introduce fuel tax

By Song Hongmei (
Updated: 2007-09-13 16:53

China is looking for an appropriate time to impose a tax on gasoline, diesel and kerosene to encourage energy conservation and reduce emission, the China Business News reported today, citing an official at the Ministry of Finance.

The government is worried about soaring fuel consumption and worsening air pollution in already smoggy cities with an increasing number of vehicles on the road, said Shi Yaobin, director of the Ministry of Finance's tax policy department, at a forum on China's auto industry development held in Tianjin over the weekend.

Shi said the ministry is considering rolling out a series of tax policies encouraging manufacturers to develop cars that are more fuel-efficient and environmentally friendly.

A fuel tax is an important tool, according to him. Being a popular practice in developed nations, it is widely regarded as the most efficient way to curb oil consumption.

Under the reform scheme, consumers will buy fuel at tax-added prices, while the current road toll system requires drivers to pay a fixed road maintenance fee to transportation departments no matter how much fuel they consume.

With the imposition of a fuel tax, drivers will have to think again before turning the ignition key. Manufacturers will also be encouraged to develop more fuel-efficient cars as fuel consumption becomes a key index for buyers when selecting a car.

The authority is also studying the feasibility of an environment tax to curb the development of high-emission cars and reduce greenhouse gas.

The ministry will promote research on preferential tax policies to encourage manufacturers to produce fuel-efficient cars. It may also impose a punitive surtax on those whose vehicles do not meet the national standard on limits of fuel consumption.

Currently, China has about 50 million vehicles on the roads. Fuel consumption of vehicles accounted for one-third of the total, and the number is estimated to rise to 57 percent by 2020. Vehicle emission has replaced coal to become the main source of air pollution in some big cities including Beijing.

(For more biz stories, please visit Industry Updates)

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