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Fuel Tax: Many Questions left Unanswered
Summary:

From page 16, Nation, issue 398, Dec 15, 2008
Translated by Zuo Maohong
Original article
: [Chinese]

The just-released draft fuel tax scheme and reform of refined oil prices has no more than 1,200 words, but the scheme is worth some 200 billion yuan in annual tax renevues, according to some estimates. Pricey words indeed.

In fact, only 300 out of the 1,200 words are directly related to the soon-to-be-introduced fuel tax. If counting these words only, each word costs a lot more.

No doubt such basis of calculation is far from logical nor scientific, but it does help to illustrate why the tax, with such complex conflicts of interests involved, would be contentious.

Since such conflicts exist, the scheme should cover every possible detail and explain each at length, as clearly as possible.

By this measure, the document is incomplete and flawed, and the current backlash against it can be traced to lack of open information.

The scheme tells us the tax will replace six fees levied on road users before, it tells us how much we would pay, and promises not to impose a heavier tax burden. But it fails to explain how much money the new tax will add to the state treasury and its difference from the abolished fees.

Part of the fuel tax we would pay, according to this latest draft, would replace these abolished fees. But after paying them for all these years, we still have no way to know how much they totaled each year and how this money has been spent.

The draft also says some parts of the new tax revenues will be used to subsidize second-grade roads built with funds the government borrowed from individuals and companies.But no one can tell us how much local governments have owed, to whom, and when will the repayment of loans end.

The scheme proposes to abolish toll collections for the above-mentioned roads gradually, but doesn't say how.

In the past decade, the government has made numerous attempts to streamline and standardize these toll collections, but after all these years and efforts, the number of toll gates along second-grade roads still account for over 60% of all toll roads in China.

I believe before the new tax scheme was drafted and released, the related authorities should have learned of the above-mentioned details. Why can't the information be released to the public to serve as the basis of informed discourse?

Let's give them the benefits of doubts, perhaps the authorities themselves too have no access to such information. If that's the case, how much can we expect from this reform?

In theory, levying the fuel tax to replace various types of fees imposed on road users may be more efficient. It may also improve pricing mechanism for oil products to reflect its scarcity, thus encouraging the public to save energy and protect the environment, which is in everyone's interests.

For the common interests, it is all the more necessary for full information disclosure prior to public feedback gathering.

Many say that the release of the scheme was a hard-won victory, and suggest that we should not nit-pick over details. The problem is, how can a draft with merely 300 words of key contents and brief official introduction be convincing?

It's true that the charges for second-grade toll roads, which mileage and toll gates account for over 60% of all toll roads in China, will be "gradually" abolished.

But you're wrong if you assume this will make you pay less on your way – charges for these roads only take up 15% of total charges for all toll roads. The government ignored this number while stressing the above 60%.

Now that the public feedback gathering period has concluded on December 12, only 20 days remain before the scheme takes effect.

Such a tight schedule seems to suggest the government's resolution to reform, but how can it be so sure that there's no strong disagreement expressed during the feedback gathering period? Especially when information disclosed was scatchy?

The fuel tax does not only affect taxpayers, tax collectors, and toll roads, but also the employment of tens of thousands of people and all related government agencies. It's not easy to balance the interests of all these groups.

When such a draft is open for public feedback, there will always be support and criticism. The point is how the government should gain as much support as possible by giving more detailed reasoning and convincing statistics.

Being frank and open will not impede the launching of the tax. Instead, it will build a solid foundation of public understanding for future reforms, paving the way for a series of possible reforms related to the pricing of natural resources.

Note:
China's State Council annouced on December 18 to put into effect the fuel tax scheme from
January 1 2009. A fuel tax will replace six fees levied on road users before, including the road
maintainance fee and transportation management fee. The tax will cost 1 yuan and 0.8 yuan respectively for consumption of each liter of

gas and diesel oil.

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