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China levies heavy tax on extra oil sales
Latest Updated by 2006-04-05 09:49:08

After China recently adjusted tax rates on consumer goods and increased prices for refined oil, it has begun to levy tax on extra petroleum sales, which analysts say outlines a rough picture for China's oil pricing system.

On Tuesday, three Chinese oil giants, Sinopec Corporation?Sinopec Zhongyuan Petroleum Co. Ltd., and Sinopec Shengli Oil Field Dynamic Group Co., Ltd. announced together that starting from March 26, China would levy a special oil tax on companies making extra gains by selling crude oil at a price above certain level, namely 40 US dollars a barrel. The tax rate will be determined by the oil company's average weighted selling prices in a month. In consideration of the international norms, crude oil sale revenue to be taxed will be measured by unit of barrel. The starting tax point for crude oil sale begins at 40 US dollars a barrel, which can climb up to over 60 US dollars a barrel, and tax rates on oil sale income can vary from 20% up to 40%, accordingly.

The three oil companies said that since uncertain factors remain, such as fluctuations of international oil prices and the Renminbi interest rates, as well as the unpredictability of the company's crude oil production in a month, it is still too early to predict the impact of the new tax policy on the company's profit. However, it is certain that when crude oil price rises above 40 US dollars a barrel on the international market, the company will have to pay more and this will somehow affect the company's profit.

Insiders say that the special oil income tax signifies that a comprehensive pricing system on refined oil will come into being in the near future in China. The tax revenue paid by the three companies in this aspect will subsidize the disadvantaged group in society or some public institutions that are affected by the rising oil prices.
Editor: Yan

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