"Selecting the right time to launch the fuel tax" has almost
become a clich used to address people's concerns about when China
will introduce the long-awaited tax system.
This term was reiterated in a report by the Ministry of Finance
at the Fifth Session of the 10th National People's Congress. The
report stressed that the fuel tax adoption process will be
accelerated in 2007, and the fuel tax will be launched "at the
right time".
Many questions surround when "the right time" will be and what
will make that "the right time". Most grassroots consumers agree
that an acceptable oil price seems to be the most important factor
in determining "the right time".
According to the State Information Center's forecasts, the
average global oil price will rise to a comparatively high level of
US$55 to US$65 per barrel this year. Such a prediction suggests
that the chances that the authorities will pass the fuel tax
resolution in 2007 are slim.
China reportedly came up with a fuel tax collection proposal
around 2001, but the "high" oil price (more than US$20 per barrel)
at that time caused authorities to hesitate in making a decision.
The question then arises: with global crude oil prices soaring to
more than US$60 per barrel, how can authorities adopt a fuel tax
system that would for grassroots consumers at least further
increase the already lofty gasoline and diesel prices?
Opposition from certain government departments is another key
reason China has not yet adopted a national fuel taxation
mechanism.
Every year, car owners in China pay road maintenance fees to all
levels of the transportation administration.
If the fee is replaced by a fuel tax, transportation watchdogs
will have less income to work with, making it difficult for the
authorities to strike a balance between national and departmental
interests.
Also, the State has started collecting road maintenance fees for
2007, which most likely means that fuel tax collection is not
feasible this year, despite the Ministry of Finance's report.
Wu Jinglian, a renowned economist with the Development Research
Center (DRC) under the State Council, called for the adoption of a
fuel tax as soon as possible to curb oil consumption and enhance
environmental awareness.
However, planners should consider the negative impacts the oil
price hike and oil tax will have on normal people's daily lives and
the auto industry's operations.
(China Daily March 7, 2007)