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Gov't to raise taxes on metals

    (According to Xinhua News Agency) China will raise taxes on zinc, lead, copper and tungsten ores from Aug 1 in a move to promote more efficient use of the resources.

    The level of tax increases will range widely, depending on which ore is mined, according to a July 5 circular issued by the Ministry of Finance and the State Administration of Taxation that was made public yesterday.

    Quality of the ore itself will also affect the tax rate. Miners will pay up to 400 percent more in taxes for lead and zinc ore, which are generally found together, reaching 10 to 20 yuan a ton compared with 3 to 4 yuan, which was set in late 1993 when the tax was first levied.

    For copper ores, the tax will be raised to 5 to 7 yuan a ton from 1.4 to 1.6 yuan, an increase of up to 400 percent.

    Tungsten ores will be taxed 7 to 9 yuan a ton, compared with 0.5 to 0.6 yuan a ton, or a rise of up to 1,500 percent.

    The tax increases are in line with market price movements and the performance of firms and are intended to promote the rational exploitation of resources, the circular said.

    "This is a proper move," said Hu Kui, an expert from a consulting center under the Ministry of Land and Resources. "Unrestrained tapping of resources in recent years has been on the rise."

    Due to rising prices for the metals, runaway exploitation has led to resource waste and damage to the environment, Hu said.

    "The new move will dampen wild corporate enthusiasm," he added.

    Prices for non-ferrous metals have soared by more than 400 percent on futures markets since 2002.

    Yet rates on resource taxation have remained outside market trends, Hu said. "This should be changed to tally taxes with market conditions," he said, adding that a mechanism should be adopted that adjusts taxes in accordance with movements in price.

    Because prices for the metals remain high, analysts said increased taxes will not seriously affect the balance sheets of miners, but may have some impact on smelters.

    "There will only be minor impacts on the profits of miners," said Yang Changhua, senior analyst at Beijing Antaike Information Development Co, which advises the government on industry policies.

    Miners may reach profit levels of 30,000-40,000 yuan a ton, while the new tax rates will increase costs by only about 1,000 yuan a ton, Yang estimated.

    Things could be different for smelters.

    "This is a seller's market, and if the miners shift the increased costs to them, it would be hard for them to stay in the black," Yang told China Daily, noting that the smelting industry does not have high profit margins.

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