Fuel oil tax levy not likely this year
(Xinhua)
Updated: 2005-09-21 10:00

China is unlikely to introduce fuel oil tax this year as officials from various government departments failed to reach a consensus on the move last week, central government officials said.

The State Development and Reform Commission (SDRC), which is responsible for the country's oil price regulation, summoned a ministerial meeting on the planned fuel oil tax on Sept. 15, the Beijing-based Economic Information Daily reported Monday.

Sixteen government ministries were present at the meeting, including the State Administration of Taxation, the ministries of finance, agriculture, communications, construction and commerce, and the general administrations of customs and civil aviation.

Following the meeting, a SDRC official said it seems the proposed fuel oil tax program will not be introduced this year because too many difficult problems remain unsolved.

In a separate report published on Tuesday, the newspaper said conflicts of interests among various government departments, and between the central and local governments were the fundamental reason behind the failure by the departments to reach an agreement.

The proposal on introducing fuel oil tax was put forward in 1994.

In January 2001 and early 2002, Finance Minister Jin Renqing, then director general of the State Administration of Taxation, said China will introduce the fuel oil tax program at an opportune time.

Xie Xuren, Jin's successor, also made similar remarks last January when asked to comment on the government's plan on fuel oil tax reform.

Without a fuel oil tax, China has been instead collecting road preset maintenance fee from automobile users no matter how much gasoline or diesel oil they use.

The fee, which exceeds 100 billion yuan (12 billion US dollars) each year, has been collected by the country's Ministry of Communications, which employs 270,000 to do the job, according to the newspaper.

Under the proposed fuel oil tax program, the paper said, the ministry will no longer collect the fee, the taxation authorities will take over

the job, but will have to make job arrangements for those 270,000 employees.

Chinese farmers, who have been exempted from the fee for using automotive vehicle, will have to pay more for gasoline and diesel oil.

The newspaper said the central government is considering oil subsidies for those farmers, but it is likely the subsidies will go to the wrong hands who may pretend to be users of automotive vehicle.

Subsidies for tax drivers will be another big problem, the paper said.

The country's auto sector will sustain great impact by the introduction of fuel oil tax, the paper said, quoting auto industry sources.

Manufacturers of fuel-efficient auto vehicles will benefit from the proposed tax, while producers of those less efficient vehicles, such as SUV and MPV, will suffer to varying degrees, the sources said.

Despite the problems, the Chinese government said the proposed tax will be introduced.

Zhang Guobao, deputy minister in charge of the State Development and Reform Commission, told reporters earlier this month more and more people have come to realize the necessity of introducing the tax.

The central government has in the past few years intended to introduce fuel oil tax when the oil prices drop to a certain low level, he said.

But, Zhang said, "We have failed to get the chance of lower oil prices".

Analysts believe China should introduce the reform as soon as possible.

An official with the Ministry of Communications told the Economic Information Daily the ministry supports the planned tax.

The official said the reform will not succeed unless the issues regarding subsidies of the socially disadvantaged groups and coordination of the reform are solved properly.

Professor Xie Zhihua, deputy president of Beijing Technology and Business University, said the reform was intended to regulate the country's fiscal system and stem institutional corruption within some departments and localities.

He said another problem that needs to be solved is that some consumers paid too much under the present fee collection arrangement.

Xie called on the central government to push forward the important reform through balancing the interests of various parties involved.

The problems can be solved if the central authorities are determined to introduce the reform with more skills and better coordination, said the professor.

The proposed reform is one of the factors the Chinese government will take into account as it considers improving its mechanism of oil product pricing, analysts said.

The prices of China's gasoline and other oil products are much lower than that of the world, and oil refineries reported growing losses and gasoline shortage has been reported in some coastal cities in China.

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