According to the latest news, China has confirmed that a new tax on sales of primary resources will be rolled out nationwide. The 5% tax is being tested in the western province of Xinjiang, with revenues going to the local government. Beijing also plans to tax other raw materials, although the tax rate may vary, a government spokesman said.
“The reform will clearly increase the local fiscal income of the resource-rich western regions. Before going nationwide, the tax will first be rolled out across the other Western regions of China – including Tibet – and will be extended to coal sales.” said Du Ying of the Chinese planning agency.
The resources tax will meet demands from local government for more fiscal autonomy. In Xinjiang – which has significant commodity deposits – there was already a tax on oil and gas output, which will now be replaced by the new sales tax.
The tax may offset the impact on domestic energy and commodity prices of a recent shift in China’s exchange rate policy. The new “flexible” yuan policy is widely expected to allow the Chinese currency to increase in value against the dollar over the coming months. This would make the cost of commodity and energy imports – on which the Chinese economy is heavily dependent – cheaper.
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