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China to implement resource tax from November

Reuters reported that China will extend a regional resource tax on domestic sales of crude oil and natural gas to the whole country and widen it to include coking coal and rare earths from November 1st 2011.

The sales of crude oil and natural gas sales nationwide would be subject for a tax of 5% to 10%, a sales tax of CNY 0.40 per tonne to CNY 60 per tonne on rare earth ores and CNY 8 per tonne to CNY 20 per tonne on coking coal. Taxes on other types of coal remained unchanged at CNY 0.30 per tonne to CNY 5.00 per tonne.

The government did not give details on why there was such a wide range in the tax levied on rare earths but analysts said heavy rare earths, which are scarce, would likely face heavier taxes.

China's resource tax at present is calculated based on the volume of production, instead of sales value, which has denied local governments from reaping the benefits of the surge in energy and commodities prices.

The move, billed as a way of conserving resources and limiting environmental damage, is part of a long awaited tax reform that would enrich the coffers of local governments but slash the earnings of resource companies, such as PetroChina Co, China National Petroleum Corp and Baotou Steel Rare Earths by billions of dollars each year.