Tax­a­tion re­bate on pe­tro­leum ex­ports to increase to 17 per­cent

China Daily (USA) - - BUSINESS - By ZHENG XIN zhengxin@chi­nadaily.com.cn

The Chi­nese gov­ern­ment’s de­ci­sion to raise the val­ueadded tax re­bate on pe­tro­leum prod­ucts has been hailed by ex­perts.

Ac­cord­ing to a state­ment re­leased by the State Ad­min­is­tra­tion of Tax­a­tion and the Min­istry of Fi­nance, the gov­ern­ment has raised the val­ueadded tax re­bate on ex­ports of oil prod­ucts, in­clud­ing gaso­line, diesel and jet fuel, to 17 per­cent, start­ing Nov 1.

With an over­sup­ply of oil prod­ucts in the do­mes­tic mar­ket, the tax re­im­burse­ment for its ex­ports will en­cour­age more oil prod­uct ex­ports and im­prove cor­po­rate rev­enue and prof­its, said ex­perts.

Ac­cord­ing to Wang Lu, an Asia-Pa­cific oil and gas an­a­lyst from Bloomberg In­tel­li­gence, China’s ex­ports of re­fined oil prod­ucts surged this year due to abun­dant re­fin­ing ca­pac­ity.

Am­ple do­mes­tic sup­ply and weak­ened de­mand also con­trib­uted to its surge, she said.

With an acute short­age of oil prod­uct mar­ket sup­plies in the past, the gov­ern­ment had pre­vi­ously im­posed strict re­stric­tions on the tax re­fund to dis­cour­age ex­ports, ac­cord­ing to Han Xiaop­ing, chief information of­fi­cer at China En­ergy Net Con­sult­ing Co, an in­dus­try con­sul­tancy in Bei­jing.

“How­ever, with a se­ri­ous sur­plus of do­mes­tic oil prod­ucts in re­cent years, the pol­icy will en­cour­age com­pa­nies to ex­port their prod­ucts to ease the coun­try’s oil re­fin­ing ca­pac­ity sur­plus,” he said.

China’s pe­tro­leum re­fin­ery dis­til­la­tion ca­pac­ity reached 710 mil­lion met­ric tons per year by the end of 2015, ac­cord­ing to Su Jun, gen­eral man­ager of the pro­duc­tion and op­er­a­tion depart­ment of China Na­tional Pe­tro­leum Corp, while fig­ures from the Na­tional Bureau of Sta­tis­tics re­veal that China’s to­tal oil pro­duc­tion reached 255 mil­lion tons dur­ing the first nine months this year, a year-onyear 1.6 per­cent increase.

On the other hand, with slowed eco­nomic growth, de­mand for oil prod­ucts like diesel is see­ing a de­crease, and the pop­u­lar­iza­tion of new en­ergy ve­hi­cles have also con­trib­uted to a slow­down of gaso­line and diesel de­mand.

The sup­ply of oil prod­ucts in 2015 reached 337 mil­lion tons, while con­sump­tion, de­spite a year-on-year increase of 4.3 per­cent, is 316 mil­lion tons, still less than sup­ply.

Against such a back­drop, many com­pa­nies are eye­ing mar­kets abroad.

Fig­ures from China’s cus­toms au­thor­ity re­veal that Jan­uary to Septem­ber diesel ex­ports reached 10.79 mil­lion tons, a year-on-year increase of 148.14 per­cent, while gaso­line ex­ports reached 6.93 mil­lion tons, a 72.26 per­cent increase com­pared with the same pe­riod of last year.

Diesel ex­ports in Septem­ber reached 1.6 mil­lion tons, a 44 per­cent increase, reach­ing a record.

Wang added that the increase in the tax re­fund will help lift China’s re­fin­ers’ prof­its, but the ef­fect might be lim­ited.

“China’s increase in the tax re­fund for ex­ported re­fined prod­ucts might have lim­ited im­pact on Chi­nese oil ma­jors in­clud­ing PetroChina and Sinopec,” said Wang.

“Many ex­ports are pro­cessed on or­der and are not sub­ject to the value-added or con­sump­tion taxes and it will take some time to see whether the tax pol­icy will work.”

With a se­ri­ous sur­plus of do­mes­tic oil prod­ucts in re­cent years, the pol­icy will en­cour­age com­pa­nies to ex­port their prod­ucts to ease the coun­try’s oil re­fin­ing ca­pac­ity sur­plus.”

Han Xiaop­ing, chief information of­fi­cer at China En­ergy Net Con­sult­ing Co

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