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Xinjiang reportedly to pilot 5% tax on gas, oil

09:33, May 27, 2010    Source: Global Times

Northwest China's Xinjiang Uyghur Autonomous Region will pilot a program to levy a 5 percent resources tax on oil and gas, up from the present rate of less than 1 percent, the Daily Economic News reported Wednesday.

"As far as I know, Xinjiang might collect around a 5 percent resources tax," the newspaper quoted an an unnamed manager with CNPC's Xinjiang oil field as saying.

The Chinese government decided to implement the tax reform on a trial basis at last week's Xinjiang work conference. The current resources tax, which is based on companies' profits from energy products, is less than 1 percent in the region.

Xinjiang is rich in oil resources. Three major oil fields are located in the region.

Crude oil output in the area has reached 25 million tons, ranking third place in China, following Northeast China's Heilongjiang Province and East China's Shandong Province.

The oil and gas resources tax will be levied on prices instead of production volume. At present, Xinjiang has a 12-yuan ($1.76) per ton resources tax on oil and gas. After the reform, the price will jump to 200 yuan ($29.29) per ton.

CNPC's annual crude oil production in Xinjiang is 18 million tons, while Sinopec's is 7 million tons each year.

If the resources tax is collected at 5 percent, CNPC and Sinopec, China's top two oil companies, will add 5 billion yuan ($732 million) in tax revenue to the region annually as oil prices stabilize at $80 per barrel.

"It's widely believed that reform will be implemented nationwide this year. The Xinjiang local government will boost its fiscal revenues, which will benefit from the resources tax mostly," said Liu Gu, an analyst with Guotai Junan Securities.

Xinjiang will receive more than 10 billion yuan ($1.46 billion) in economic aid next year from 19 provinces and municipalities designated as partners. Government delegations from the 19 provinces and cities, including the municipalities of Beijing, Shanghai and Shenzhen, as well as South China's Guangdong Province, visited the region last month to discuss detailed plans to boost Xinjiang's development.    (Extracted By Sean)