China to Impose Rare Earth Tax

To curb the tendency, the government is all set to issue the new and special VAT.

In the case of the national reserve, the ultimate goal is to create a rare earth trading platform, where China expects legitimate miners to participate. The government is said to be conducting a series of talks with the country's rare earths enterprises to initiate the process. A detailed project plan towards the creation and management of the national reserve will soon be formed.

Reports indicate that rare earth companies in Sichuan and Inner Mongolia are to be the first companies to be allocated the VAT permits, in a bid to regulate the overproduction of the mineral. Companies that have received notification from the government said the tax permit will be issued by the State Administration of Taxation this week.

Rare earth reserves in Sichuan and Inner Mongolia are relatively centralised and easy to supervise, while the reserves in Fujian, Guangdong and others regions are scattered. Reports indicate that the initial steps in Sichuan and Inner Mongolia could well result in the authorities extending VAT to the whole country.

"The special invoice has a two-dimensional code, and will be needed by any producing company who would want to continue operations,'' an official with China Minmetals Rare Earth Company told newswire agencies.

He added that the VAT system would help the government control overcapacity, illegal mining, resource drainage and pollution of mines in the rare earth industry.

Jiangxi province, which has the country's largest reserves of heavy rare earth metals, will also have separate controls on exploration. ''The volume of this year's rare earth exploration in Jiangxi will be equal to that of the previous year, but we will concentrate more on the sustainability of the industry's development,'' Hu Xian, director of the department of land and resources of Jiangxi province told newswire agencies.

Li Shanle, an official with the bureau of industry and information technology in Jiangxi province said the VAT introduction was an important regulatory step. The tax will cover mining and smelting, separation and distribution of rare earths. While it will control illegal mining, the new tax will also differentiate between light rare earths and heavy rare earths.

The booming rare earth industry in China has attracted many firms. Aluminum Corp of China signed a cooperation framework agreement on March 12 with Guangxi Nonferrous Metals Group and Grirem Advanced Materials Company. Together, they are to establish a venture developing rare earth resources in South China's Guangxi Zhuang autonomous region.