Experts say China’s oil and natural gas tax were previously levied according to the production volume, so it was unlikely to reflect the real costs of oil and natural production.

But under the new mechanism, tax will be levied on the sales, and therefore better react to international price levels. So, for individual consumers, what does this all mean? Experts say, not much.

After the tax calculation policy adjustment, sales-based tax rates for oil and natural gas will be raised to an amount between 5 and 10 percent. It’s up from the previous 5 percent implemented in north-east China’s Xinjiang Uyghur Autonomous Region last June.

Shi Dan, a senior research fellow with the Chinese Academy of Social Sciences says the sales-based tax rates mechanism can better cushion fluctuations in international prices, and limit its impact on industry.

"The fluctuations in international oil prices are massive. But our previous tax calculation method is based on production volume, in which the real costs of making it can not be reflected. But the new tax mechanism will better reflect those costs. Meanwhile, the tax itself is also included in the sales price, so the adjustment will only impact oil and natural gas miners directly, but not refiners. But do not forget that the government can also alter the tax rate within the range between 5 and 10 percent, that can help cushion the pressures of international prices if they surge." Said Shi Dan.

Analysts also say that the new tax policy is expected to bring about multiple benefits both in terms of environmental protection and boosted fiscal revenues for local governments.

Shi Dan said "By nudging up the natural resources tax rate level, the local government will collect more in fiscal revenues. China has paid a price for its mining of natural resources. And the government is hoping that some of those increased revenues could be used in local environmental protection."

Experts say that the broader taxation coverage and higher taxes for some valuable materials are in line with the nation’s efforts to cut excessive emissions.

Officials with the State Administration of Taxation say that because China’s oil and gas resources are relatively richer in the central and western regions, the sales-based taxes will also contribute to balancing the country’s regional economic development.

Source:cntv.cn