Before an expected resource taxation plan is implemented, related concerns about its impact must be cleared up, analysts have said.

Their comments were made following news that a detailed plan for tax reforms may be revealed this year, according to a senior official with the State Administration of Taxation (SAT), on Thursday.

Yang Suizhou, deputy director of the SAT's local tax department, said the administration was preparing the plan and will exchange views with the relevant government departments.

Yang said the reforms might involve a shift to taxation by price instead of volume and include a hike in tax rates.

The government has been trying to raise taxation on the tapping of resources in order to increase the efficiency of resources exploration and promote a more economical use of resources.

It intends to cut energy intensity by 20 percent and pollution emissions by 10 percent during the 2006-10 period and taxation is viewed as an important lever to achieve these goals.

In August, the authorities sharply raised resource taxes on zinc, lead, copper and tungsten ores.

Apart from raising tax rates there is a consensus that taxation by price, instead of volume, would be more reasonable.

"It will play a role in encouraging efficient tapping of resources when resource prices surge," said Hu Kui, from a consultancy center under the Ministry of Land and Resources.

The orientation of a price-based taxation is all right, said Jiang Yukun, senior analyst with Everbright Securities in Shanghai.

For miners in some resource sectors where prices are high but profits are low, however, the price-based taxation method would engender a heavy tax burden, Jiang said.

"The profit levels of resource products differ, even though prices are surging."

It is better, therefore, to introduce a differential taxation policy specifically targeted at different types of resource products, he said.

It will be a complicated process, he added. "It will put the wisdom of policymakers to the test."

He suggested that legislators and leaders of industry should thoroughly discuss the pros and cons of the new plan.

The August hikes in resource tax rates, which are volume-based, went against the industry's expectation of a price-based method, which is a sign that more communication is needed in making the new plan, Jiang said.

(China Daily 01/12/2008 page10)