Ore taxes rise in China
SteelOrbis Shanghai China's Finance Ministry and State Taxation Bureau decided to raise the resource taxes applied to any kind of ore obtained from the ground. The government in China imposes a preferential taxation policy on the underground resources, where actual taxes applied consist of a percentage in a predetermined tax amount. With the new increases, the reduction in resource tax of iron ore will be changed into 40 percent from 60 percent. In other words, iron ore will be subject to 60 percent of the predetermined resource tax. Accordingly, the coal resource taxes will increase by RMB 3/mt, RMB 3.6/mt, RMB 2.5/mt and RMB 3.2/mt in Hubei, Guangdong, Hunan and Inner Mongolia respectively as of January 1 2006. The adjustment also abolishes the preferential taxation policy on non-ferrous metal ores. Therefore the manganese ore resource tax is increasing to RMB 6/mt from RMB 2/mt. The new resource tax rate for first class molybdenum ore is RMB 8/mt, second class is RMB 7/mt, third-class is RMB 6/mt, fourth-class is RMB 5/mt, and fifth class is RMB 4/mt. This is the second resource tax adjustment in 2005. In May, the Finance Ministry and Taxation Bureau had already adjusted coal resource tax in certain provinces between RMB 2-4/mt. The increase in iron ore resource tax will drive up miners' cost. This will in turn lead to price hike under short supply condition.