Fuel tax levy awaits approval

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Last updated at: (Beijing Time) Wednesday, January 14, 2004

Fuel tax levy awaits approval

The government does not have a timetable for levying the new fuel tax designed to replace the road maintenance fees, Director Xie Xuren of the State Administration of Taxation (SAT) said Tuesday.

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The government does not have a timetable for levying the new fuel tax designed to replace the road maintenance fees, Director Xie Xuren of the State Administration of Taxation (SAT) said Tuesday.

"The tax-for-fee reform is still being processed," Xie said.

The Ministry of Finance, the SAT and other related government departments have done a lot of preparation work investigating, studying and testing the new tax, he said.

"The new tax has entered the procedure of final approval," he said, without disclosing details.

Current high oil prices on the international market are the major reason for the repeated delay of the new tax, he said.

The government will put the new levy into practice when the time is ripe, Xie added.

However, he explained, it is still unclear when international oil prices are expected to stabilize.

International oil prices have risen from about US$10 per barrel in March 1999 to about US$27 per barrel at present.

High oil prices and the relatively high tax rate would saddle users with an excessively heavy financial burden, experts said.

The fuel tax, combined with the value-added tax and the consumption tax, would account for more than 50 per cent of fuel prices, one expert familiar with the new tax said.

"This will increase the burden for those who frequently use vehicles, including taxi drivers,'' said Ni Hongri, a senior researcher with the State Council's Development Research Centre.

But for private car owners who do not frequently use their vehicles, the new tax is expected to help them save a considerable amount of money since, under the new tax, they will no longer need to pay the road maintainance fee.

"The government should start levying the tax as early as possible, since international oil prices always fluctuate," Ni said.

Chen Huai, another senior researcher with the centre, said the high oil price on the international market is only an excuse for the delayed implementation of the new tax.

"The repeated delay is mainly because of conflicting interests among different departments," he said. "Communication departments will no long hold the road maintenance fees as they do now after the implementation of the new tax."

It will also add a financial burden on domestic finished- oil producers, the original target of the tax.

The Chinese Government has made the elimination of unscheduled levies and the transformation of necessary fees and charges into taxes as one of the priorities of its fiscal reforms.

The proliferation of such fees, which are usually managed as "off-budget" income, has sparked a vast number of complaints and complicated the fiscal operation of the State.

The Ministry of Finance has decided to choose the management of charges on vehicles as the area in which to make a breakthrough because the problem of rampant levies is very serious in this area and reforming this sector is regarded as being relatively easy to handle.

In October of 1999, the Standing Committee of the National People's Congress passed amendments to the country's Highway Law, paving the way for the institution of the fuel tax.

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