September 17, 2013 / 3:01 AM / 4 years ago

China local governments propose 2-10 percent coal resource tax: paper

SHANGHAI (Reuters) - China’s top four coal-producing provinces have proposed that the national coal resource tax be set at between 2 to 10 percent of sales value, local media reported on Tuesday, as part of Beijing’s efforts to introduce broader resource tax reforms.

Steam coal miners in China, the world’s top producer and importer of the fuel, are currently taxed based on sales volumes that are usually very low. Beijing has been planning a value-based tax for years, but efforts to push through changes have stalled over concerns higher prices would hurt economic growth.

Faced with weak demand at home at a time when global coal prices have plunged under a supply crush, the governments of Inner Mongolia, Shanxi, Xinjiang and Qinghai areas have proposed that the tax reform must not increase miners’ burden and that all other arbitrary levies must be scrapped, the 21st Century Business Herald said, citing government officials.

Steam coal prices in China have been steadily falling since December and have dropped about 15 percent this year. Miners’ profits have decreased and inventories have climbed, while the amount of money owed to miners by their customers have also surged, according to a recent report by the coal association.

    China’s Shenhua Energy (1088.HK)601088.HK posted a 5 percent fall in its first-half net profit, China Coal’s (1898.HK)(601898.SS) slumped 43.4 percent and Yanzhou Coal Mining (600188.SS) reported a net loss of 2.1 billion yuan.

    Some of the challenges in the proposed tax reform is that current policies and coal quality vary widely across different provinces, while the downturn in the coal market would make it harder for local authorities to implement an environmental tax, the paper said.

    The ruling party will hold a key meeting in November that will set the country’s economic agenda for the next decade, with tax reform likely to be a priority.

    China’s Finance Minister Lou Jiwei said last month that Beijing would levy consumption tax on goods that cause severe environmental pollution and over-exploitation of resources.

    Reporting by Fayen Wong; Editing by Himani Sarkar

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