China contemplates coal reserve tax

CHINA’S resources tax should be attached to proved reserve amounts rather than the current application to extracted output, an industry expert said at a recent roundtable.

Donna Schmidt

Feng Fei, head of the industry economy department of the Development Research Center of the State Council, told the energy forum audience in China that the proposal could increase the extraction rate because, he said, producers currently do not pay the tax on unexplored reserves.

Fei said some of the sub-par deposits are being ignored and wasted because of the costs associated with exploration, according to the Shanghai Daily.

Current extraction rates are floundering at approximately 45% for larger mines and only 15-20% for smaller ones, the paper said, which are figures well below the worldwide average.

In related news, the country’s State Administration of Taxation has instituted a resources tax increase across three of China’s provinces and has further plans to do the same with several other provincial areas over the next year or more, the paper reported.

The hike, which went into effect last weekend, increased Jiangsu coal taxes to 2.5 yuan (US31c) per tonne while the rate in Heilongjiang jumped to 2.3 yuan and Shaanxi went up to 3.2 yuan.

The news comes just days after China’s State Administration of Coal Mine Safety announced plans to close all small operations extracting less than 30,000 tonnes per annum by next year in an attempt to improve industry safety.

The report drew criticism from at least one expert: China Coal Information Institute researcher Lan Xiaomel told the Daily, “The direction is right in the light of safety, but a better way is to look into the problem case by case. Supply from big companies cannot meet all domestic demand for the time being.”