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China proposes reform of fuel tax, pricing
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As of the New Year, Chinese drivers will no longer have to pay road maintenance fees, but they will face higher taxes on fuel that could offset any savings from that change depending on how much they drive.

That is the intention of a draft plan on fuel taxes and refined oil product pricing released on Friday evening for public comment.

The plan, scheduled to take effect on Jan. 1, will abolish six fees now charged for road or waterway maintenance and management. At the same time, it will raise gasoline taxes from 0.2 yuan (about 3 US cents) per liter to 1 yuan and diesel taxes from 0.1 yuan per liter to 0.8 yuan.

The fuel price system will also cover farm vehicles and ships.

Pump prices are not intended to rise as a result of this tax and price reform, according to the draft document jointly released by the National Development and Reform Commission (NDRC), the Ministry of Finance, Ministry of Transport and State Administration of Taxation.

There will be a ceiling on pump prices as part of this reform, the document said.

At present, the maintenance fees are fixed, regardless of how much a driver uses their vehicle per year. In Beijing, a four-person car is charged about 1,300 yuan per year, depending on the make of the vehicle. The rates vary by city.

The abolition of fees could make it cheaper for drivers who rarely use their cars, but the higher taxes mean that heavy drivers will eventually reach a point where savings on maintenance fees will be offset by higher taxes. Thus, the plan is intended to cap, and perhaps decrease, fuel use.

The four ministries said the reform program "is aimed at facilitating energy saving and emissions reductions, as well as the economic structural adjustment."

Beijing-based government economist Wang Xiaoguang said: "The reform will make the taxation much fairer, by collecting more from those who drive more and use more fuel instead of levying the same amount of road maintenance fees regardless of how much oil is consumed.

That will encourage people to cut driving, especially when oil prices are high, and have a positive effect on energy-saving and conservation.

A poll by China's leading website Sina.com on Friday night found that more than 54 percent of 92,434 netizens surveyed backed the fuel tax hike but nearly 77 percent said the announced tax rate will be too high.

Liu Xiaoze, a Beijing taxi driver, said she was worried about higher post-reform fuel costs. "I don't know whether my income will be affected if oil prices run high again."

Pump prices will not be higher because of the new system, said Liu Shangxi, deputy chief of the Research Institute for Fiscal Science under the Ministry of Finance.

"Taxes on oil products account for just a small part of retail prices," said Liu. "There remains much room for the purpose of energy-saving."

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