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China's coal fees cut, tax collected as procedure is streamlined

12 February 2015   (0 Comments)
Posted by: Author: CCTV
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Author: CCTV

China's coal tax reform comes at a time when the government has promised to shore up the industry and improve the rapidly deteriorating environment. So far, the reform has collected more taxes for governments and cut even more fees for coal producers. 

On average, coal producers are now paying four yuan per ton less in taxes than before. But that's not the end goal for authorities, who hope the tax reform can help align China's resource and pricing mechanisms with the market.

Back when the resource tax on coal was based on quantity, coal producers had to pay fees under various names. Those fees were often subject to change, creating confusion for the companies. 

"I didn't know about the standards for the price adjustment funds. So there was uncertainty in terms of our cost control," says Chen Laiyuan, CFO of Shenhua Beidian Victory Energy Compamy Limited.

"There was considerable arbitrariness and flexbility when it comes to fees. So it was difficult for companies to control costs and start working with cost accounting. But now that the taxes are set, they're rigid. Companies will be able to work the numbers and calculate costs, sales and taxes," says Cai Zili, deputy director-general of Assets & Act Tax Division, State Administration of Taxation. 

The new coal tax, which brings stable taxation, is concurrent with the clearing off of fees as China tries to streamline the process.

"We've made the clearing off of fees as a precondition of the reform. Some of the reasonable fees have been incorporated into the new taxes, while the unreasonable ones have been cut... This is to make things more regulated, transparent and fair," Cai says.

"In general, companies know where things are now, like how much we can make for every ton of coal. The reform is by and large reasonable," Chen says.

Analysts say the tax reform would also facilitate changes in other areas.  

"The reform's implications are twofold. It can facilitate the comprehensive utilization of resources. On the other hand, the reform was launched on the basis of the clearing off of fees, something that was very hard to accomplish. In that sense, it's beneficial to the construction of modern governance mechanisms," says Yang Zhiyong, researcher of NTL Academy of Econ Strategy, CASS.

Experts say that in the short term, the new policy will likely put extra burdens on the coal producers. But the continued slump in coal prices has offered an appropriate timing, as it mitigates the impact for producers. 

This article first appeared on english.cntv.cn.


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