20000124

China delays controversial fuel tax implemention

BEIJING: China has postponed the introduction of a controversial fuel tax due in part to an unexpected rise in international oil prices, the China Daily Business Weekly said on Sunday.

"Because of excessively high oil prices, we have decided to replace the fuel tax with a rural fee-cutting drive as a top priority on our fee-to-tax agenda," Cheng Faguang, vice-minister of the State Administration of Taxation, was quoted as saying.

The newspaper also attributed the delay to "insurmountable conflicts and imperfections".

"The current fuel tax scheme needs further improvement and there are insurmountable conflicts," Zhang Peisen, a researcher with the administration, was quoted as saying.

Opponents of the fuel tax argued it would push up domestic prices, hurting farmers and shipping firms as well as creating a fresh incentive for smuggling.

China's parliament, the National People's Congress, approved a fuel tax to finance road maintenance last October, marking the start of moves to replace random administrative fees with taxes as the central part of a government blueprint for tax reform.

The fuel tax was originally slated to go into effect early this year.

State media have said the tax rate would be one yuan ($0.121) per litre of diesel and 1.2 yuan per litre of gasoline. It would have been much lower than the various administrative fees collected at present.

In May, parliament rejected a fuel tax proposed by the Finance Ministry due to fears of protests from farmers who do not use highways often.

China has sought to replace random administrative fee charges with taxes to boost government revenues and curb corruption.-Reuters