http://www.theage.com.au/business/now-china-mulls-tax-on-resources-20100609-xwwn.html
Now China mulls tax on resources
JOHN GARNAUT
June 10, 2010
China is taking steps towards imposing a resources tax for the first time, countering assertions by the mining magnate Andrew Forrest at a rally in Perth yesterday.
Mr Forrest, chief executive of the iron ore miner Fortescue Metals, held up China as an exemplary economy that was turning its back on communism by lowering resources taxes.
''In China right now there's a fierce debate about how to lower their resources tax to encourage the mining industry," he told an ''axe the tax'' protest before a speech by the Prime Minister, Kevin Rudd.
''I ask you which communist is turning capitalist and which capitalist is turning communist?''
Analysts in China were perplexed by Mr Forrest's comments, as China is in fact taking steps towards imposing a resources tax, which Beijing sees as a means of conserving resources, slowing environmental destruction and rebalancing an economy that delivers bloated corporate profits at the expense of households.
"We didn't have any taxes before. It was tiny, like 0.3 per cent on some resources, and now people are starting to think we should charge," said Huang Yiping, professor of economics at the China Centre for Economic Research at Peking University. "A resources tax will definitely be imposed in the next five years.''
China Daily, the Communist Party's main English-language newspaper, has held up Australia as an example for China to follow.
"A hint to this nation's policymakers: if they are looking for guidelines to the long-awaited tax reform, take a good look at Australia's latest plan to increase worker pension funds with a new tax on resource projects,'' the paper said on May 26.
On June 1 China's unveiled its first resources tax, at a rate of 5 per cent on fossil fuels in Xinjiang, as a way of retaining some of the region's mineral wealth in local hands.
Since then a vice-premier, Li Keqiang, has advocated a national resources tax in a speech published in Seeking Truth, the Communist Party's leading theory magazine.
Officials have hinted that Xinjiang will be a pilot for a resource taxes that will gradually be imposed on all mineral resources.
Chinese industry leaders are lobbying officials to obstruct the proposed tax, as they are in Australia.
Zeng Shaojin, vice-president of the China Mining Association, said taxes on iron ore should be reduced to stimulate domestic suppliers and reduce dependence on imports.
The vice secretary of the China Iron & Steel Association (CISA), Qi Xiangdong, said he had lobbied government to reduce iron ore taxes.
Mr Forrest's comments yesterday were not the first time an Australian mining billionaire has levelled the "communist" charge. Last week the maverick Queenslander Clive Palmer said the Treasurer, Wayne Swan, was a "communist" and a "goose''.
Nor is it the first time Mr Forrest has got China upside down when it has suited his interests. Last August he said CISA had the power to implement a vague investment deal.
''CISA was once viewed as a dog with a lot of bark. I think it is now viewed across China as a dog with a lot of bark and bite,'' said Mr Forrest, after agreeing with CISA to a slightly larger price cut of 35 per cent on the condition of up to $US6 billion in finance from an unnamed Chinese institution.
One of Mr Forrest's own advisers told the BusinessDay at the time: "Mr Forrest does not understand China - the China Iron & Steel Association has nothing to do with Chinese financial institutions."
The proposed investment never materialised, and CISA has been ignored or overruled in China on every substantial policy matter since.
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