China to keep fuel tax rates unchanged in '09

Shanghai, November 25 (Gasgoo.com) China's Ministry of Finance has decided to leave gasoline and diesel consumption tax rates unchanged in 2009, in response to rumor that it might raise the tax, said sina.com today, citing a new notice on the ministry's website.

The decision was passed by the State Council on November 5, preceding closed-door talks last week during which officials proposed raising the fuel consumption tax instead of imposing a new fuel tax. The consumption tax is now levied on seven refined oil products rather than the retail staples of gasoline and diesel, but the refiners pass the costs on to their consumers.

The Ministry of Finance has published the decision on its website (www.mof.gov.cn), saying that the consumption tax, effective January 1, 2009, will maintain the previous rates -- 0.28 yuan ($0.041) per liter for leaded gasoline, 0.20 yuan per liter for unleaded gasoline, naphtha, solvents and lubricants and 0.10 yuan per liter for diesel, jet kerosene and fuel oil.

China's retail fuel prices have not changed since a hike in June, but world oil prices have slumped more than 60 percent from a record $147 a barrel hit in July. Many analysts and consumers have been waiting for the government to follow the global market trend and cut fuel prices before introducing any fuel tax.

Although the State Council will not change the fuel taxes, the National Development and Reform Commission, China's top economic planner, last week said it was studying reforms of the fuel pricing mechanism and the feasibility of lowering pump prices and scrapping road tolls.

The Chinese government is likely to place a cap on retail prices, and this move may effectively give state-owned oil giants Sinopec and PetroChina more room to cut prices to rival small private refineries after the crude costs have plunged.