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An official with the Ministry of Finance (MOF) said Wednesday that there existed difficulties with the levy of fuel oil tax and how it would operate in farming communities 

"There's no timetable for China's fuel oil tax levy," said Su Ming, deputy director of the research institute of the MOF. How to levy fuel oil tax on farmers was a big problem, he said.

According to Su, Chinese farmers spent 30 billion yuan (US$3.7 billion) on diesel oil in 2002. The sum doubled to 60 billion yuan in 2004.

He noted that the capacity for ordinary people to withstand cost increases for oil was another factor which affected the levy of fuel oil tax. 

A circular issued jointly by the MOF and the State Administration of Taxation last week said  China will collect a consumption tax on naphtha, solvent and lubricants at a rate of 0.2 yuan per liter and 0.1 yuan per liter for aviation fuel and fuel oil.

The levy of consumption tax on fuel oil could be regarded as compensation for the delay in the introduction of the fuel oil taxation, said Su.

China announced a rise in the price of processed oil while setting up a mechanism to offer subsidies to disadvantaged communities and public service sectors as well as collecting special fees from oil producers who sell domestically produced crude oil.

Su said that to impose fees on oil mining sectors while offering subsidies to disadvantaged communities and public services would be good for improving the efficiency of the industry. It would break-up the monopoly which existed and increase government expenditure on oil mining.

(Xinhua News Agency March 30, 2006)