China's Resource Tax to Be Applied Nationwide

China will extend a resource tax on domestic sales of crude oil and natural gas from some regions to the whole country and expand the list of taxable resources to coking coal and rare earths from November 1, the government said on October 10, 2011.

The move, billed as a way of conserving resources and limiting environmental damage, is part of a long-awaited tax reform that would enrich the coffers of local governments but slash the earnings of resource companies.

The sales of crude oil and natural gas sales nationwide would be subject to a tax of between 5-10 percent, China's State Council said. It would also impose a sales tax of 0.40-60 yuan ($0.06-9.45) per ton on rare-earth ores and between 8-20 yuan a ton on coking coal.

The government did not give details on why there was such a wide range in the tax levied on rare earths but analysts said heavy rare earths, which are more scarce, would likely face heavier taxes.

China's resource tax at present is calculated based on volume of production, instead of sales value, which has prevented local governments from reaping the benefits of the surge in energy and commodities prices, the government said in a statement.