China’s coal tax reform on track

China's resource tax reform plan for the coal industry has already been submitted to the State Council and might possibly be carried out as early as January 1, 2014, a source was quoted by a financial information portal as saying Thursday.

The source was quoted by financial portal aastocks.com as saying that the preparation work for coal resource tax collection, which will be calculated based on sales value rather than the previous method that was based on the quantity of production, has already been completed.

Currently the coal resource tax is set at between 2 to 8 yuan per ton according to the collection method based on production quantity, while under the new calculation method, the tax rate will be set at between 2 to 10 percent of sales value, according to the aastocks.com report.

Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times on Thursday that the tax rate of 3 to 5 percent is more reasonable under current economic conditions.

Specific reform plans released last month include speeding up reforms of the coal resource tax following the four-day Third Plenary Session of the 18th Communist Party of China Central Committee, and requiring the country to change its tax collection method from being based on the production volume to sales value.

Lin also noted that it is currently a good opportunity to execute the reform plans because the sales price for coal is at a relatively low level and reform will have limited impact on the nation's economy.

Thermal coal prices have seen an obvious drop recently this year with the latest China coal pricing index declining by 24.5 points year-on-year to 158.0 points, mainly because of oversupplies and high inventory levels for the domestic coal industry, the China National Coal Association (CNCA) said Wednesday.

But Lin said the reform of coal resources tax collection will finally lead to price rises in coal resources which would result in saving energy and reducing emissions, and improve energy utilization efficiency.

"In the short term, coal prices are unlikely to rise due to oversupply in the coal industry, which makes it impossible for rises in the sales value," Lin said.

The inventories of coal for coal enterprises nationwide have seen a continuous rise since the middle of 2012, and the total coal inventories of major power generation enterprises declined by 19.9 percent year-on-year by the end of July to 68 million tons, the CNCA said quoting the latest data it has monitored.