The stock market, which is usually sensitive, turned a blind eye to the bad news of the crude oil tax levy. This reflects the complicated tax and fee structure of the domestic petroleum industry.
On December 19th, media reported that "Deputy Minister of Finance Zhu Zhigang said that currently the Ministry of Finance has proposed a resource tax reform plan, setting the crude oil reform tax rate at 10%, starting with a 5% levy."
Our reporter verified this with relevant officials from the Ministry of Finance and the State Administration, both parties stated there was no such information. However, market participants did respond. An industry analyst predicted that if a 10% crude oil tax is levied on crude oil, Sinopec's overall profit will drop by around 20%.
But the stock market, which has been in an adjustment phase recently, seems to have not reacted much to this major negative news. The Shanghai Composite Index has gained for two consecutive days, and PetroChina, which has performed poorly, has also risen for two consecutive days.
Continuous controversy over fee-to-tax reform
Analysts believe that the complex tax-fee relationship in the petroleum industry is also one of the reasons why the bad news has been downplayed.
Han Xiaoping, information director of China Energy Network, believes that adjustments to the resource tax rate will not have too much impact on the cost and profit of the petroleum industry.
In fact, the current taxes and fees paid by the petroleum industry include resource tax, resource compensation fee, and special income fund.
Han Xiaoping believes that if the resource tax rate is increased, related charges should be abolished, which is also the direction of fee-to-tax reform. Therefore, implementing a 10% crude oil tax will not have too much impact on the petroleum industry.
Moreover, he indicated that companies like Sinopec and PetroChina have strong public relations capabilities, and excessive cost increases may result in the failure of the reform plan to pass.
"Resource compensation fees are unlikely to be abolished in the short term," Shi Zhengwen, deputy director of the Institute of Taxation and Finance of China University of Political Science and Law, also stated that a realistic issue is that it would be difficult to resolve the placement of a large number of personnel in the fee collection system in the short term.
And the special income fund is only levied when oil prices exceed a certain level, serving as a regulatory tool for excessively high oil prices, but with a fixed tax rate, it clearly does not play a role in regulating oil prices. For this reason, many insiders believe that the special income fund will not be abolished in the short term.
Continuation of loss subsidies
The government's policy-based loss subsidy for petroleum enterprises has always been controversial.
This time, raising the crude oil tax also drew attention to policy-based loss subsidies. On one hand, the state raises the tax rate and increases taxation on oil companies, while on the other hand, it provides subsidies, which appears contradictory.