July 9 (Bloomberg) -- China, the world's largest metal consumer, held a meeting in Beijing to discuss "adjusting" resource compensation fees for 21 commodities including coal, copper, gold, oil and natural gas.
The discussion was about potential changes to the 1994 compensation regulation, the China Iron & Steel Association said on its website, citing a statement from the Ministry of Land and Resources. Representatives from 11 areas including Hubei, Tianjin, Henan, Inner Mongolia provinces attended the meeting, the statement said, without giving details on the changes.
China this year revised its taxation of oil, gas and coal extracted in Xinjiang province, pegging the rate to prices instead of volume produced, to bolster the coffers of local governments as commodity prices rose. Governments worldwide are seeking to boost their share of mining profits, which may constrain supplies, Rio Tinto Group Chief Executive Officer Tom Albanese said yesterday.
"The compensation fees were imposed to prevent an overdevelopment of natural resources," Liang Owen, a mining analyst at Guotai Junan Securities Co., said in Shenzhen. "For China, it's more urgent to implement the revised taxes to boost the Western region development. We can't see any impact on the metal producers so far since the revised tax was only on energy companies."
China plans to extend the revised tax rate on oil, gas and coal to the entire nation, after the trial in the western regions, the National Development and Reform Commission said yesterday. The revision may hurt profits at companies including PetroChina Co., according to JPMorgan Securities Ltd.
1994 Tax Rate
The government imposed a 4 percent resource compensation fee for precious metals including gold and silver, 3 percent on neodymium, dysprosium and other rare earths, 2 percent on iron, copper, lead and zinc and other metals, and 1 percent on oil, natural gas and coal, according to a State Council statement issued in February 1994.
A typical mining company in China's western regions would have about a 2 percent levy that combined resource tax and compensation fee, before the new rate, Liang said.
Crude oil futures have risen 26 percent in the past two years, and gold prices have jumped 32 percent, and copper futures in London are up 42 percent over the same period.
The Australian government this month reached an agreement with mining companies to impose a 30 percent mineral resources tax on iron ore and coal. Funds from the levy will enable the government to cut the company tax rate and help fund spending.