Top Chinese Coal Provinces Set Resource Tax Near 10 pct Maximum

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China’s top two coal areas, Inner Mongolia and Shanxi, have set their coal resource tax at nearly 10 percent, the upper end of Beijing’s limit, but many other provinces have set it at around 2 percent in an effort to help miners.

The resource tax for the autonomous region of Inner Mongolia and Shanxi province has been set at 9 percent and 8 percent of the sales value respectively, while the tax in the third-largest producing area of Shaanxi province was set at 6.1 percent, according to local government websites.

The changes, which took effect from Jan. 1, are part of a broader resource tax reform rolled out by Beijing to levy tax on coal based on the sales value instead of production.

The State Council, China’s cabinet, has allowed local governments to set their own tax rates at between 2 percent and 10 percent. In a bid to ease the financial burden of struggling miners, Beijing also ordered provincial authorities to scrap all other miscellaneous charges.

While the tax rates set by Inner Mongolia and Shanxi were high, analysts said tariffs in most provinces were lower than expected and would support miners, which have been buffeted by a slump in coal prices since 2012.

Tax rates for the provinces of Henan, Hunan and Guangxi province were set at between 2 percent and 2.5 percent, according to media reports.

“Inner Mongolia and Shanxi rely heavily on coal for fiscal revenue so they can’t afford to have a low tariff,” said Thomas Deng, a coal analyst with consultancy IHS-C1 Energy.

The lower-than-expected tax rate for most areas helped push up shares in Chinese coal producers on Monday.

More than 10 coal mining companies, including Shanxi Xishan Coal and Electricity Power, Yongzhou Coal Mining company and Datong Coal Industry Co, jumped by their 10 percent daily limit.

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