The government should consider levying higher taxes, even
imposing a windfall-profit tax, on resource and energy exploration,
a sector dominated by State-owned enterprises (SOEs). The proposal
is part of leading think-tank economist Justin Lin's road map to
rein in the economy after an average annual growth of 9.7 percent
for almost three decades.
"It can be a prescription for several symptoms," said the
director of Peking University's China Center for Economic Research.
The measure can help speed up SOEs' restructuring and enrich the
government's coffer, besides helping improve the environment.
The average tax rate for resource and energy exploration in the
country is as low as 1.8 percent compared to the world average of
about 20 percent. The government's resource utilization fee is very
cheap, too. Take coal mining for example, the government charges
mine owners just 1,000 yuan (US$120) a year for every square km of
area explored.
The low taxation rate has caused reckless exploitation of
resources, bringing in large "unfair" profits for the SOEs and new
investors, and creating a shockingly huge amount of waste. "In some
regions, mine owners are apparently granted mining rights almost
without having to pay any tax or fees and that's unfair," Lin
said.
A National Development Research Centre (NDRC) report says that
an average mine in Northwest China's Shaanxi Province extracts only
30 per cent of the coal from a seam, leaving the rest buried
forever simply because of the low resource utilization fees.
Raising the resource utilization tax or imposing a
windfall-profit tax would force companies to reduce environmental
damage caused by their projects, he said. "Up to 50 percent of
windfall tax can be imposed on the profits of some companies."
The tax revenue can be directly channeled to the local
governments' coffers in the resource-rich regions, which can use it
for education, healthcare and other public services.
The central government has imposed a windfall tax on oil
explorers and that has contributed to its treasury. But it has to
spend a huge part of this money to subsidize crude oil refineries.
As a result, local people cannot benefit from the resources being
explored on their land.
Conceding that some SOEs are still burdened with redundant
staff, laid-off workers and other social security problems, Lin
said further SOE reform could help make his taxation proposal a
reality.
A higher taxation rate could help curb the losses to State
assets, too, he said. "Many of the SOEs are planning to go public
overseas (and some have already done so). That will benefit
overseas stock buyers instead of people at home if the tax rate
remains low."
(China Daily August 20, 2007)
