MAC: Mines and Communities

China slaps heavy new tax on coking coal, rare earths

Published by MAC on 2011-10-18

China slaps heavy new tax on coking coal, rare earths

By Frik Els

10 October 2011

Reuters reports China will extend a resource tax - calculated on value rather than volume of production - 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 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, such as PetroChina Co, China National Petroleum Corp and Baotou Steel Rare Earths by billions of dollars each year. The tax on rare-earth ores will be levied according to a wide range of between yuan 0.4 - 60 per ton and between yuan 8 - 20 a tonne on coking coal.

Reuters reports 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. Thermal coal tax rates are not affected.

MarketWatch reports China introduced a 5% resource tax, which calculates tax based on value rather than on volume of production, in oil-rich but ethnically troubled Xinjiang Uighur Autonomous Region last year and later extended it to 12 western provinces and regions.

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