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Fuel tax will not be introduced until 2008 at the earliest

BEIJING – The much talked-about fuel tax is still under discussion, according to officials close to the tax authorities. Planning specialists believe the fuel tax will not be introduced until 2008 at the earliest, even if the final draft is completed this year.


More than a decade ago, in 1994, the government began conducting a feasibility study on the replacement of the annual road maintenance fee (charged for every registered vehicle) by a fuel tax. Introduction of the fuel tax has been postponed repeatedly, however, mostly because of rising international oil prices.


But some analysts suggest that China would not be in a hurry to introduce the new fuel tax even if world oil prices fell to what they were three years ago. This is because the fuel tax policy will involve many factors, including energy consumption and environmental protection, far different from the earlier, relatively simplistic understanding of using the fuel tax to replace the road maintenance fee.


There are signs that government departments are examining the issue with a new line of thinking that aims to make it more scientific, more rational and more practical. So far, central government departments have drafted a series of related rules, including interim fuel tax regulations, an administrative method on the collection of the fuel tax, and interim rules for the administration of the fuel tax-funded special transportation fund.


According to financial and taxation experts, the fuel tax program has been given much more meaning. It now involves not only reform of the transport sector and taxation of motor vehicles, but also the introduction of different tax rates. The new program will have a direct impact on energy saving, air pollution and environmental protection. 


Some experts suggest using floating tax rates, which can be regulated according to changes in oil prices. Rates could be lowered for fuel-efficient, environmentally friendly vehicles that meet State IV emissions standards, they say.


Government authorities have more than once announced that the new policy would be introduced “very soon” or “when the time is ripe.” People are wondering when exactly this might be; in fact, some experts say that any time is appropriate.


Actually, when oil prices rise, it would be a good time to introduce the fuel tax to regulate oil consumption,” said An Tifu, vice chairman of the China Taxation Society. “The fuel tax should be able to galvanize consumers into saving energy in a society that espouses the market economy.”


All in all, experts say that the controversial fuel tax should be introduced as soon as possible to avoid further trouble, but that it could also cause some new problems.


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