Coal Tax Reform To Ease Burden On Producers, Environment

　　China, theworld's leading coal producer and consumer, is to levy resource tax on coal onthe basis of sales instead of production from Dec 1, in a move to shore up thedim industry and improve the deteriorating environment.

　　Clear off fees to usher in reform

　　The key to the reform, however, is to clear out charging fees involving coal.Due to historical reasons, Chinese coal producers pay taxes as well as feesunder various names, such as coal price adjustment funds, compensation fees fornative minerals, and fees for local economic development.

　　The State Council, China's cabinet, decided to clear off these fees beforeimplementing the resource tax reform on coal, at an executive meeting on Sept29.

　　The reform plan bans local governments from setting up funds that charge coalproducers, according to a circular issued by the Ministry of Finance and theNational Development and Reform Commission (NDRC) in October.

　　The circular stipulated that no more administrative charges or governmentalfunds involving coal, crude oil, and natural gas, are allowed to initiate byany local government, department or unit, except with permission from laws,rules and State Council regulations.

　　There must be accountability for any violations, warned the Ministry of Financeand the NDRC, who also set Sunday as the deadline for local governments toreport their cleanup campaign and the list of fees to be canceled and to bekept.

　　China's top coal producers have sped up actions to meet the deadline. NorthChina' s Shanxi province has cut 10.8 billion yuan ($1.77 billion) of fees coalproducers have been charged since a massive cleanup in June.

　　"The 10.8 billion yuan represents what can be calculated," said acoal industry insider asked to be anonymous. "Coal producers' burden havebeen eased even more significantly if those 'invisible charges' are counted, asmany of them are just uncountable."

　　Shanxi, which has yielded one fourth of the country' s coal since 1949, hasseen sharp decrease of coal profit since the second half of 2012. The per tonearning dropped to 2.6 yuan ($0.4) in the first three quarters this year,compared to 45 yuan ($7.4) in 2013, and 139 yuan ($22.8) in 2011.

　　The heavily coal dependent province was alert to the worsening situation in thecoal industry even before the national reform was to launch. It worked out 20measures last year in support of the industry, which cut 14.5 billion yuan($2.4 billion) burden for coal producers.

　　Analysts from Taiyuan coal trade center do not see a price hike for coal in thefourth quarter, despite a modest increase of demand during the heating seasonand industrial consumption due to sluggish economic growth.

　　More than 70 percent of the coal producers are in deficit, according tostatistics from China National Coal Association.

　　Less is more

　　Under the coal tax reform, the market is to play a decisive role in resourcedistribution, as required by the Third Plenary Session of the 18th CommunistParty Central Committee held in November, 2013.

　　"The current practice does not reflect the scarcity of resources on theone hand, and leaves a loophole that allows some coal producers to concealtheir real production and sales on the other," said Geng Mingzhai, head ofschool of economics, Henan University.

　　The waste during production and damage to the environment have not beencalculated in the collection of taxes.

　　"This is to be changed in the new tax reform," said Geng.

　　The short-term benefit for coal producers is obvious. They need not pay dozensof kinds of fees charged in various names.

　　As a result of balancing local finance and coal producers, however, it is muchlikely the overall burden of coal producers will remain unchanged, said KongQingwen, chief of the bureau of finance, Wuhai City, Inner Mongolian AutonomousRegion.

　　Kong suggested local governments consider coal mining cost when imposing thetax, and try every means to help coal producers get through the tough time.

　　According to the reform plan, provincial governments are the one to decide thetax rate within a specified range of two to 10 percent.

　　"Local governments decide how much tax coal producers should pay under thegeneral principle of reducing their burden," said Geng. "In caseslike Shanxi, it's a game between the government and coal producers, because thegovernment in debt also wants the income."

　　A government official from Shanxi who declined to be named disclosed that thetax rate set by the province is less than 8.6%, which is to cut 17 billion yuan($2.78 billion) fees to be charged with coal producers.

　　Local governments' appetite, however, can be counterbalanced when higher rateweakens the competitiveness of their tax payers in the market, said experts.

　　(Source: Xinhua)