Draft law: Tax on auto dealer surcharges

Date Aug 24 2011 15:40:14

As China's auto market boomed over the last two years, cars in high demand - especially imported luxury vehicles - often carried a hefty extra fee from dealers for getting the goods as soon as possible. 

Dealers directly charge extra thousands, even tens of thousands of yuan, or force customers to buy more options at exorbitant prices if they want to cut the waiting time. 

The practice is controversial - and car buyers might have to soon even pay taxes on the surcharges. 

Early this month, the State Administration of Taxation formulated a draft revision of the national auto sales tax implemented in 2007. 

The new regulation in circulation for public opinion would require customers to pay tax on extra fees as well as the purchase price. 

Fees subject to tax include payments for extra equipment, accessories, customization and other surcharges from dealers, according to the draft. 

"It is still controversial whether it is illegal for dealers to charge additional fees," according to a notice posted on the administration's official website. 

"To levy taxes on the extra payments doesn't mean the administration supports or opposes the behavior," it said, noting the purpose of the revised regulation to battle tax avoidance by auto dealers. 

The new draft has lead to heated discussion in the market. Supporters say the additional charge is part of the market economy and higher taxes could help regulate irrational consumption by the wealthy. 

Yet more voices seem to disagree, alleging such extra fees charged by dealers are illegal and the new regulation would legitimize the practice. 

It will certainly increase the burden on customers, they say. 

Jiang Suhua, an attorney at the Yingke Law Firm and a member of the legal team at the Chinese Consumer Association, said such dealer surcharges "infringe on the price law, contract law and also violate the law governing unfair competition". 

Car buyers have sued dealers in Beijing for charging more than the sticker price and the courts ruled dealers should return the overcharge, Jiang said, calling on other customers to take the initiative to report such dealer behavior. 

But some analysts say the reasons for dealers to add on charges are complex. 

They note the country's regulation on auto sales implemented in 2007 allows foreign carmakers to authorize exclusive distributors in China, in effect giving them an import monopoly. 

But in some cases, auto companies force dealers to buy unpopular models along with hot-selling cars, so dealers need a bigger profit on high-demand products to cover the loss, independent automotive analyst Jia Xinguang said. 

When a particular model is indeed in short supply and customers want a priority in delivery, then it should be clearly priced how much the expedited delivery costs, Jia said. 

But he cautioned that any dealer effort to create an artificial shortage through holding back cars is clearly illegal and should be punished. 

He noted that regulators should not only consider tax issues, but also illegal activities. 

"Consumer interests should be the top priority,"he said. 

Guidelines issued to promote China's logistics industry

Date Aug 24 2011 15:39:55

The State Council, or China's Cabinet, on Friday issued new guidelines to promote the healthy development of the country's logistics industry.

China will reduce tax burdens on logistics enterprises, give further favorable land policies for them, and promote convenient transport of logistics vehicles, according to a statement posted on the central government's website.

The country also vowed to accelerate reform in the logistics management system, reallocate logistics resources, push forward the innovation and application of logistics technologies, and invest more in the sector.

Farm produce logistics will be given priority, and government departments will improve coordination to accelerate the development of the country's logistics sector, the statement said.

In recent years, China's logistics industry has been experiencing consistent growth on the back of fast economic progress and a manufacturing-centered economy.

The emergence of a domestic market, rising demand for industrial and consumer goods and a large geographical spread have also resulted in the development of logistics services.

Last year, the industry's value-added reported a net increase of 700 billion yuan ($109.38 billion) from 2008, He Liming, chairman of China Federation of Logistics and Purchasing, said in an exclusive interview with Xinhua.

However, he noted that current policies lagged behind the actual needs of the industry, which restricted further development of the sector.

"It is a pressing need for the government to adopt new measures to boost the logistics industry," He said.

He believes the guidelines offer new hope for the growth of the sector as the government put forward concrete measures to resolve long-term problems facing the industry.

Statistics showed that road tolls accounted for nearly one third of the operational costs of logistics enterprises, which not only weighed on the companies' profit margins but also reduced logistics efficiency.

The ratio of total logistics costs to a country's gross domestic product (GDP), which reflects the efficiency of the logistics industry, decreased 0.3 percentage points last year from 2008, according to He.

However, the efficiency of China's logistics industry has room for improvement. According to a report from the KPMG, a global accounting firm, China's ratio of logistics spending to GDP is well above the average level for developed countries, where it is typically lower than 10 percent, as inefficient operations and inadequate transportation capacity have troubled China's logistics development.

To tackle the problem, the country pledged to cut fees and road tolls by gradually eliminating tolls on secondary roads, reducing toll gates and restricting the number of toll ways, according to the guidelines.

Additionally, the country encouraged big logistics enterprises to consolidate the fragmented industry through mergers and acquisitions, while small- and medium-sized enterprises should consider forging alliances for common development, the guidelines said.

Local governments are required to invest more in the construction of logistics infrastructure and provide necessary capital support to key logistics companies.

The guidelines also stressed the importance of the innovation of logistics technologies.

"The issuance of the guidelines showed the government's determination to boost the logistics sector. I believe the industry will enjoy a better business environment in the future," He noted.

China to grant tax rebates for natural gas imports

Date Aug 24 2011 15:39:16
China will grant tax rebates for its imports of natural gas, including piped gas from central Asia and seaborne shipments of liquefied natural gas (LNG), Reuters reported.

The rebates will apply when import costs are above domestic wholesale prices and will cover the period from 2011 through 2020, as well as central Asian imports before the end of 2010, the Ministry of Finance said in a statement posted on the its website, www.mof.gov.cn. 

The policy will help trim heavy losses incurred by firms such as PetroChina, which has since late 2009 been forced to sell pricey Turkmenistan gas at below-market prices. 

China is rapidly raising imports of natural gas, a fuel that is cleaner than oil and coal, with purchases in the first seven months this year doubling year-ago levels, part of a broader plan to boost natural gas use and curb coal consumption. 

China's gas demand is projected to triple in the coming decade to about 300 billion cubic meters and imports are likely to make up nearly a third of that demand, analysts have said. 

The rebates apply to state-mandated import projects including the central-Asia pipeline venture operated by PetroChina, and LNG import terminals currently in use and those to be later approved by the state, the ministry said. 

Imports currently account for roughly 20 percent of consumption. 

The company will receive rebates on a quarterly basis and the grants will be based on the proportion derived from the price gap between imports and domestic prices divided by import prices. 

Chinese media has reported earlier this year that PetroChina recorded a loss of 3.7 billion yuan on 4.3 billion cubic meters of imported gas last year, which indicated the firm was making a loss of nearly $130 for each thousand cubic metres of gas. 

China to set stricter emission standards for thermal power plants

Date Aug 24 2011 15:39:01
 China's environmental authorities are mulling over stiff new emissions standards for thermal power plants amid concerns that they may increase costs and lead to more losses.

The new standards, consistent with an earlier version issued in January, will be released for public consultation in late August, according to the Ministry of Environment Protection.

In the latest version, the nitrogen oxide emission cap limit will be cut by half to 100 milligrams per cubic meter for thermal plants with denitration facilities or designed to have such facilities. Sulfur dioxide emissions is limited to 100 milligrams per cubic meter for newly-built thermal plants.

The new version will add emission standards of air pollutants and mercury emissions in key areas, according to the ministry.

The ministry consulted with major power companies and environmental protection agencies before releasing the earlier version in January.

Industry insiders say stricter standards will be good news for denitration facility manufacturers with advanced technologies as they will take advantage in this booming market.

The environmental authorities said the country might have difficulties in capping nitrogen oxide emissions in the second half of this year, most of which are emitted by thermal plants.

The government so far has no plan to increase power prices in order to subsidize thermal plants for more expenditures on denitration facilities due to fear that it may cause more inflationary pressure.

The stricter standards have triggered concern that they might force thermal plants to spend more on pollutants processing facilities and hence increase the financial burden on those that are already in the red.

China's top five power companies in the thermal power sector posted a 18.1-billion-yuan ($2.8 billion) loss in the January-July period, 11.3 billion yuan more than the same period of last year, according to a report by the China Electricity Council.

Ministry vows to improve rare earth export regulations

Date Jul 27 2011 17:18:04

CHINA said yesterday that it will synchronize its rare earth export rules with both Chinese law and the regulations of the World Trade Organization.

Zhong Shan, China's vice commerce minister, made the remarks at a rare earth export conference held in the north city of Baotou, the country's largest producer of the metal.

"Rare earth metals are non-renewable resources of great strategic importance. Improving the regulation of rare earth exports will help us to protect the environment and promote industrial restructuring, as well as allow the rare earth industry to develop in a healthy way," Zhong said.

The ministry will "synchronize" the regulation of the exports and domestic production and consumption of elementary rare earth products, he said.

He noted that the ministry will ensure that the country's rare earth environmental protection standards and industry entry standards also apply to rare earth exporters and cooperate with relevant departments to strengthen crackdowns on rare earth smuggling.

The ministry also vowed to encourage the development of advanced rare earth materials.

Zhong's remarks came after a WTO panel report released on Tuesday that supports complaints against China regarding the country's restrictions on the exportation of various raw materials such as zinc, coke and magnesium.

Although this case does not involve the rare earth metals, analysts said it could be a precedent.

Rare earths are a group of 17 minerals on the periodical table. Their unique magnetic and phosphorescent properties make them vital ingredients for producing sophisticated products ranging from electric car batteries, wind turbines to aerospace alloys.

China now supplies more than 90 percent of the global rare earth demand. However, decades of excessive exploitation has caused its reserves to fall to about one-third of the world's total from a reported 85 percent in the 1990s.

Mining of rare earth elements is environmentally hazardous. As the world's largest rare earth supplier, China has suffered from serious environmental degradation.

To control the environmental damage, the Chinese government has announced various policies, including suspending the issuance of new licenses for rare earth prospecting and mining, imposing production caps and export quotas and designing tougher environmental standards.

These measures, however, sparked complaints from major rare earth consumers such as the United States and Japan.

China has repeatedly stated that its regulation of the rare earth industry aims to protect the environment and resources.

The WTO's Article 20 allows its members to impose export restrictions for reasons such as conservation of exhaustible natural resources if such a restriction is made effective in conjunction with restrictions on domestic production or consumption.

Report by SHMET