BEIJING, Dec. 12 (Xinhua) — China will raise taxes on oil products from Saturday, the second increase in a month.

Tax on gasoline, naphtha, solvent oil and lubricating oil to will rise to 1.4 yuan (about 23 U.S. cents) per liter from 1.12 yuan. The levy on diesel, jet fuel and fuel oil will be increased from 0.94 yuan per liter to 1.1 yuan, according to the Ministry of Finance (MOF) and the State Administration of Taxation.

Retail prices of gasoline and diesel will be reduced by 170 yuan and 400 yuan per tonne after adding the higher tax, the National Development and Reform Commission announced in a separate statement.

Retail fuel prices have been cut for ten times since July as the government reacts to lower crude prices on the global market.

The adjustment will offset the drop in the price of crude oil and analysts estimate that fuel costs for drivers will remain flat after the move.

The raise involves other petroleum products including naphtha, lubricating oil and jet fuel. A statement on Nov. 28 exempted small-displacement motorcycle, tire and ethyl alcohol from the tax to reduce burden on low and middle income group.

Fuel tax and pricing reform began five years ago, raising consumption tax and launching a pricing system more closely linked with international market.

Consumption tax was firstly imposed in 1994 on consumer goods with a high energy cost and high pollution to make production and consumption more environmentally-friendly and promote sustainable growth.

Over ten countries including Russia, Australia, New Zealand and France have raised their oil product consumption tax since 2012 to ensure green development.

Zhu Qing of Renmin University of China, believes that heavy tax on the products that harm the environment is a global trend, noting the average tax on oil products hit 0.67 U.S. dollar per liter in the 34 OECD countries with the highest as much as 1.4 U.S. dollars.

“It’s a signal of tougher policy on energy saving and emission reduction,” said Liu Shangxi, director of the research institute for fiscal science at the MOF.

Liu said that there is no sign of a mechanism connecting the tax on oil products and the oil price, and the two recent increases mainly targeted cutting fuel oil consumption.

“Energy saving is a long-term mission,” he said, “Low oil prices can hardly contribute to better air and living conditions.”

When asked about if there is any repetition between fuel tax and expressway tolls, Liu explained that the MOF released a notice to prevent repetitive taxes and dues in road and waterway transport in 2009, the year fuel tax and pricing reform kicked off.

Source: Xinhuanet.com