Yangcheng Evening News - reported by journalist Limai Yan: According to the "Notice on Adjusting Applicable Tax Rate Standards for Resources Tax of Tin Ore and Other Minerals" (Finance and Taxation [2012] No. 2) issued recently by the Ministry of Finance and the State Administration, starting from February 1 this year, China will increase the applicable tax rate standards for resources tax on some non-metallic mineral ores, ferrous metal ores, and non-ferrous metal ores. This also means that the scope of China's resource tax reform has expanded from crude oil and natural gas to some non-metallic mineral ores, ferrous metal ores, and non-ferrous metal ores.
The "Notice on Adjusting Applicable Tax Rate Standards for Resource Tax of Tin Ore and Other Minerals" issued this time by the Ministry of Finance and the State Administration expands the scope of adjustment of applicable tax rate standards to some non-metallic mineral ores (involving magnesite, talc, boron ore), ferrous metal ores (involving iron ore), and non-ferrous metal ores (involving tin ore, molybdenum ore). Moreover, looking at the magnitude of this tax rate adjustment, the adjustment intensity for some resource items is quite significant.
Tin ore is first in line, with the largest increase in tax rate standards. The resource tax rates for grades one to five mines have been increased from 1 yuan, 0.9 yuan, 0.8 yuan, 0.7 yuan, and 0.6 yuan per ton respectively to 20 yuan, 18 yuan, 16 yuan, 14 yuan, and 12 yuan per ton, which is a twentyfold increase compared to the original rate. The tax rate standard for talc and boron ore has been adjusted from the original 3 yuan per ton to 20 yuan per ton. The tax rate standard for magnesite has been increased from the original 2 yuan per ton to 15 yuan per ton. The increase in molybdenum ore was relatively smaller, with each grade increasing by 4 yuan compared to the original rate. The resource tax for iron ore has been adjusted from a reduction of 60% of the specified rate to a reduction of 80% of the specified rate, which will result in an increase in the tax burden.
In the latest industry research report, analyst Xiaoqing Song from CITIC Securities pointed out that although the short-term increase in resource tax would directly negatively impact the performance of related companies, in the long run, the increase in resource tax would suppress the exploitation of low-grade mines, reduce supply, and be beneficial for reasonable resource pricing. For those companies with pricing capabilities, they can still pass on the cost pressure caused by this tax rate adjustment to downstream enterprises and consumers.
Song Xiaoqing believes that among the related listed companies, Yunnan Tin Industry Co., Ltd. (000960) will be relatively more affected. Calculated based on an annual ore processing volume of 3 million tons, it is expected that this increase in resource tax will increase costs by 57 million yuan. After deducting corporate income tax, it will affect net profit by about 48.45 million yuan, equivalent to 0.05 yuan per share earnings. For Jinchuan Molybdenum Co., Ltd. (601958), calculated based on an annual ore processing volume of over 10 million tons, the after-tax impact on the company after this adjustment will be 34 million yuan, equivalent to 6.7% of the net profit in the first three quarters of 2011, or a benefit of 0.01 yuan.