September 29, 2014 / 11:31 AM / 5 years ago

UPDATE 1-China to overhaul coal resource taxes -cabinet

(Adds detail, background)

BEIJING, Sept 29 (Reuters) - China will impose a new resource tax on coal from Dec. 1 and will cancel a series of existing charges, its cabinet said on Monday, in a move to simplify the tax structure for struggling coal producers.

China’s State Council said it would cancel the charges, including an environmental compensation levy, in a bid to simplify the way coal production is taxed, according to a statement on the government’s official website (www.gov.cn).

“The implementation of coal resource tax reform ... will not only be of benefit to resource-rich regions but will also promote coordinated regional development and the rational exploitation of resources,” the notice said.

Coal producers in China, the world’s biggest consumer of the fuel, have been struggling as a result of a massive supply glut and a collapse in prices. More than 70 percent of firms have made losses this year, according to the China Coal Industry Association.

The State Council said in the notice that it would “severely punish the illegal collection of fees in order to reduce the burden on coal enterprises”.

The new tax will be calculated on the basis of prices, rather than production volumes, a method that has saddled many bigger producers with large tax bills even as prices have fallen. The exact rates will be determined on a region-by-region basis, the notice said, without giving further details.

The tax rate is expected to vary between 2 and 10 percent depending on the region, according to media reports last year.

China has already implemented similar reforms in the taxation of crude oil and natural gas production.

Changes to the resource tax have long been on the agenda and are aimed at encouraging the more efficient use of coal, which has been blamed for China’s severe air pollution problems. (Reporting by David Stanway; editing by Jane Baird)

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