BEIJING, Nov 4 (Reuters) - China is preparing to apply a new resource tax to coal, which would boost the tax burden on miners and bring more revenue to local governments, a Chinese newspaper reported.
The resource tax, equal to 3-5 percent of the coal sales value, would replace the current tax based on output volumes, which is equivalent to about 1 percent, China’s Economic Information Daily cited an unnamed source as saying.
China launched a pilot scheme in June this year, applying it to crude oil and natural gas in its western region of Xinjiang, with the intention of rolling it out nationwide later.
Talk of the resource tax being extended to coal miners has been rife since the Xinjiang pilot scheme began, but many coal producers and traders doubt it would be implemented so soon, with China bracing for what some weather forecasters say will be an unusually cold winter, when the country will require more coal rather than less.
“We’re now entering the heart of winter and its crucial for mines to continue production and for power plants to have enough supplies. It wouldn’t make sense for the government to implement it now,” said a manager at a mid-sized coal firm that produces and trades about 5 million tonnes of thermal coal per year.
Any increase to taxes could reduce profits for major miners such as Shenhua Energy Co (1088.HK) and rival producers but could also hit utilities such as Huaneng Power (600011.SS) and Datang International Power (601991.SS) if miners pass on some of the costs.
Another coal trader said concerns about inflation may also encourage Beijing to delay raising coal taxes until some time next year.
“Utilities are already incurring heavy losses and any further increase in coal prices will hit them pretty hard,” he said. “I think the government could introduce the tax only after winter, when the coal market calms down.”
Last month the government set out its five year plan for 2011-2015, with a heavy emphasis on improving energy efficiency.
China is trying to wean itself off coal in order to clean up its environment and cut emissions. But that is difficult because coal is by far its most abundant and cheapest fuel, so the government may need to resort to legal or administrative tools to tip the balance in favour of cleaner fuels.
Many provinces have been cracking down on small mines in the last two years, seeking to root out inefficiency and improve China’s terrible coal mining safety record.
That campaign turned China into a major coal importer last year, with net imports of more than 100 million tonnes of coal. This year, the government expects net imports to hit 120 million tonnes, with most of the supply coming from Indonesia, Australia, Mongolia and Vietnam.
Reporting by Tom Miles and Fayen Wong; Editing by Ken Wills