Beijing: China might cut by nearly half a tax rebate on crude imports, as a domestic fuel price hike and easing global oil prices revive the refinery balance books it was designed to soothe, a business paper reported today.
“The tax rebate, which currently covers three-quarters of a 17% value-added tax (VAT) on crude imports, might be cut to just 40% of the VAT charge,” said China Business News, citing several unnamed sources familiar with the situation.
“The specified subsidy amount is set according to changes in international crude prices and refining losses,” the report quoted a senior official with top refiner Sinopec as saying.
In the second quarter of this year, Sinopec was awarded a total subsidy of 22.93 billion yuan and 3.07 billion yuan in value-added tax rebates for imports of refined oil products.
But its quarterly earnings still plunged 87% to 2.2 billion yuan.
The Sinopec source said that the government was now mulling a cut in the subsidy because Beijing had raised gasoline and diesel prices by nearly 20% in late June, easing pressure on refiners that were being forced to sell at loss-making state prices.
Global crude markets have also sunk from a July high of over $147 a barrel, to trade at just over $109 today, reducing feedstock costs.