Resource tax on fluorite to be levied based on sales volume in China

Fluorite, the mineral form of calcium fluoride, is the major source of fluoride industry. In June 2016, China’s fluorite price continues increasing. Currently, the average quoted price of fluorite (CaF2>97%) has now gone up to USD227.66/t. This rebound started in April accordingly.

“The fluorite market will maintain this upward trend in the short term,” predicted Stanley Wang, chief editor of China Fluoride Material Monthly Report, CCM.

“The good market is mainly due to that reason that the operating rates of downstream hydrogen fluoride (HF) and aluminium fluoride (AlF3) industries stand high, at about 60-70%, indicating stable demand,”

“In addition, the continuous rainstorms in southern China have impacted the operation of flotation devices, probably to draw back the production,” commented Stanley.  

According to the Notice on the Reform of Resource Tax released by China’s Ministry of Finance and State Administration of Taxation, fluorite has also been listed in the resource tax reform.

From 1 July this year, the resource tax on fluorite will be levied based on value, tax rate at 1-6% instead of on quantity, at USD3.04/t. Meanwhile, the basis for taxation will be modified, from “sales volume of raw ore” to “sales of raw ore and ore concentrate (OR raw ore processed products)”.

“The resource tax reform will be favourable for domestic fluorite enterprises to ease the pressure, stabilise the prices and gradually get out of the downturn,” stated Stanley.

Take coal resource tax reform (tax rate: 2-10%, based on value) carried out on 1 Dec., 2014 for example. According to statistics released by the State Administration of Taxation, in 2015, the taxes on domestic coal enterprises were down by USD2.75 billion – tax on coal resources on average down by USD0.65/t. The coal enterprises’ tax burden rate was reduced from 8.0% to 5.7%, according to CCM’s research.

“Moreover, it would encourage the fluorite enterprises to exploit fairly low-grade fluorite ore rather than just the high-grade fluorite ore with higher profit,”

“Before, the fluorite enterprises were levied based on the sales volume of raw ore. That’s to say, the fluorite enterprises had to pay the same tax for the same sales volume of high-grade fluorite ore and low-grade fluorite ore. It was for sure that the enterprises were more willing to exploit the more profitable high-grade fluorite ore rather than the low-grade ones,”

“With the new reform on resource tax, the enterprises would be levied accordingly based on the sales. More sales, more tax. Fewer sales, less tax. It would help encourage the enterprises to exploit the low-grade fluorite ore and improve the resource utilisation rate,” stated Stanley.

In addition, the Chinese government is to completely remove the charging funds, and to enhance the administration on preferential tax policies.

 
The removal of charging funds will:

• Cut down the mineral compensation expenses of all resource categories to zero, stop levying the price regulation fund, and cancel the local charging funds set up illegally and targeted at minerals
• Call off all local charging funds related to minerals, however established not in line with government’s regulations or by overstepping the authority

In regard to enhancing the administration on preferential tax policies, it is aimed at improving the comprehensive utilisation rate of minerals by:

• Reducing the resource tax on minerals exploited through filling-mining method, by 50%, and on minerals exploited from the failure phase mines, by 30%
• Decreasing or removing the resource taxes (decided by provincial governments themselves) on mineral products extracted from low grade ore, mullock, tailings and residues that are expected to use

“The measures taken by the government would further ease the tax burden on the minerals enterprises,” Stanley added.

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