Oil taxes may be combined
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China should raise the threshold for the windfall tax on crude oil sales and combine it with other resource levies, a PetroChina Co executive said yesterday.
"Our upstream business is subject to the windfall levy, resource tax and the mining resource compensation fees. They more or less overlap," PetroChina Chief Financial Officer Zhou Mingchun said in Shanghai.
Crude produced and sold in China is subject to a windfall tax - introduced in 2006 - of 20 to 40 percent on the portion of the price above US$40 a barrel. New York crude for April delivery rose to as high as US$103.35 a barrel in electronic trading yesterday after the Libya air strikes.
Zhou said the stronger yuan has now effectively lowered the trigger point for the imposition of the tax to slightly more than US$30.
The government is studying raising the threshold for the windfall tax and combining the taxes.
"I think the direction is clear. It's only a matter of time," Zhou said, adding that the company lost 0.88 yuan selling each cubic meter of natural gas it imported from Turkmenistan last year because of domestic prices being capped.
China began to try out a price-based resource tax last year in some western provinces, shifting from a volume-based tax to help raise funds to develop the resource-rich but poor areas. Due to the trial PetroChina has had to pay an additional tax payment of 2.2 billion yuan (US$335 million) last year, he said.
Analysts have said the government may cut the windfall profit tax on oil firms. It may raise natural gas prices to encourage faster domestic oil and gas exploration and development especially after the government last week said it would defer approval for nuclear plants pending safety reviews.
