CHINESE refiners' earnings are facing a tumble with fears the government will end a 75-percent refund on the crude oil import tax this month after June's fuel price hike.

If true, top Asian refiner Sinopec Corp and its unit Sinopec Shanghai Petrochemical Co will be set to post losses in third-quarter results, a Goldman Sachs report said.

Industry consultancies, associations and media reports said China might have decided to scrap the tax rebate on the 17-percent value-added tax collected on crude imports. The refund has been granted to Sinopec Corp and PetroChina Co, the nation's second largest refiner, since April as part of a series of state measures to help refiners squeezed between soaring crude rates and state-set below-cost fuel prices.

Sinopec and PetroChina said they have not received any notice of a cut in the rebate. Goldman said Sinopec is still negotiating with the government on the issue, after it checked with Sinopec's management.

China raised gasoline and diesel prices by up to 18 percent on June 20 for the first time in eight months. It was the largest increase ever and was to help refiners and improve energy conservation, leading to the removal of the rebate subsidy, analysts said.

If the VAT rebates are ended and assuming there are no further fuel price hikes or cash subsidies, Sinopec's earnings would be cut by 62 percent this year and would post a loss in 2009. Sinopec Shanghai would post a loss this year and next, Goldman said. It would cut PetroChina's earnings by 5 percent this year and by 9 percent in 2009.

But Goldman said China may increase fuel prices further in coming months and the government may continue to provide cash subsidies.

"Things may not be too bad as the government may wait until the year's end to give a one-off subsidy to Sinopec, allowing it to prepare for a satisfactory full-year earnings report," said an analyst at Citic's China Securities Research.