Editorials

Tax resources properly

(China Daily)
Updated: 2010-05-05 08:12

Editor's note: China may learn from Australia to reform the tax system and has the resource tax.

A hint to this nation's policymakers: If they are looking for guidelines to the long-awaited tax reform, take a good look at Australia's latest plan to increase worker pension funds with a new tax on resource projects.

This nation is badly in need of reforming the resource tax to conserve resources and protect the environment. Reform could also help narrow the disparity in incomes, a key problem that China must overcome to develop sustainably.

Though the government's priority is to evolve the resource-intensive model of economic growth, the country is not doing enough to save its resources, particularly because of the need to fight the worst global recession in decades.

This year marks the end of the country's 11th Five-Year plan and it is vital that the authorities reform how China prices and taxes its resources to ensure that resources are used wisely and that the environment is protected in the next five-year period.

The reform should both expand the resource tax base to include materials that have not been taxed before and switch to a tariff that charges per unit instead of a tax based on monetary value. The reform will frustrate mining companies by increasing their costs and vex policymakers by adding to inflationary pressures.

But the country's growing appetite for resources has made it more urgent than ever to realign output with its resource supply constraint through a new and more market-based resource pricing and tax system.

One more incentive to reform the resource tax is that the current pricing and tax system unfairly pads the wallets of mining companies and exacerbates the country's widening income gap.

Australia's case indicates that policymakers could kill two birds with one stone if the resource tax is properly collected and used. China needs such a resource tax, too.