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China: Law on Resource Tax Passed

(Nov. 22, 2019) On August 26, 2019, the Standing Committee of the National People’s Congress (NPC) of the People’s Republic of China (PRC or China) adopted the PRC Resource Tax Law. The Law subjects 164 natural resources, including salt, crude oil, natural gas, coal, and other minerals, to the resource tax and prescribes their respective tax rates. The Law also authorizes the State Council to levy a water resource tax on a trial basis. The Law will take effect on September 1, 2020. (Arts. 1, 14, 17, Appendix.)

Legislative History

China has been imposing a resource tax on minerals and salt in accordance with an administrative regulation—the Tentative Regulation on Resource Tax—which was promulgated by the State Council in 1993 and took effect on January 1, 1994. The Regulation was revised in 2011. According to official statistics, from 1994 to 2017, 932.5 billion yuan (approximately US$132 billion) in resource tax has been collected nationwide, of which 135.3 billion yuan (approximately US$19 billion) was collected in 2017 alone.

When explaining the draft of the Law to the NPC Standing Committee, the minister of finance said the Law was made on the basis of the Tentative Regulation with the purpose of fulfilling the principle of “statutory taxation”—that is, the types of taxes, rates, and mechanism of taxation must be provided by laws passed by the NPC rather than by regulations issued by government administrative organs.

Application of the Law

All entities and individuals who develop taxable resources within PRC territory and other waters under the jurisdiction of the PRC must pay the resource tax in accordance with this Law. (Art. 1.)

Power of Provincial Authorities

Among the 164 taxable resources specified by the Law, major resources, including crude oil, natural gas, shale gas, and rare earth, are subject to fixed rates that are applicable nationwide. Most other resources, including coal, iron, gold, and silver, are subject to a range of rates. For those resources with the range of rates specified, the Law grants provincial level governments the power to propose the actual rates to be applied, which will then be decided by the people’s congresses on the same level and filed for the records of the NPC Standing Committee and the State Council. (Art. 2 & Appendix.)

 Water Resource Tax

According to the Law, a water resource tax is to be imposed on a trial basis on entities and individuals using surface water or groundwater. The State Council is to formulate detailed implementation measures and file the measures for the NPC Standing Committee’s records. Within five years of the enactment of this Law, the State Council is to propose a revision of the Law to the NPC Standing Committee. (Art. 14.)

The water resource tax has been piloted in Hebei Province since 2016, and has been expanded to nine other localities that have experienced a scarcity of water resources, including Beijing and Tianjin.