China is said to be considering a move to cut tax for iron ore mining companies in a bid to reduce input costs for the nation's steel industry.
The country's Ministry of Industry and Information Technology is reportedly working with the Finance Ministry and other parties on a proposal to reduce the current corporate tax rate of 25% by 10% to 15% for iron ore mining firms.
China is the world's top consumer of the ore but domestic iron ore miners have been burdened by high production costs and have failed to compete with Australian miners including Rio Tinto and BHP Billiton, forcing the country's big steel makers to rely heavily on imported ore.
It is said that the average cost of producing domestic iron ore, most of which is of a grade as low as 20%, ranges between USD90-100 per tonne, compared with around USD 30 per tonne to USD 50 per tonne for Australian miners.
Taxation of the resources sector has become an increasingly important issue for China and the central government is increasingly using tax policy to pursue its environmental goals and to preserve domestic supplies.
In November 2011, China extended nationwide a new resource tax on domestic sales of crude oil and natural gas. Previously, this resource tax was applied to oil and gas extracted in the western province of Xinjiang.
The new tax is being imposed ad valorem, rather than on the previous per tonne basis and the table of resource tax rates also includes a range of taxes on other minerals, including coal, ferrous and non-ferrous metal ores, salt and rare earths.
