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It is unlikely that the consumption tax on oil will be reduced

Jul 31 , 2019

Following shared by Drill Pipe supplier China.

According to recent market rumors, the central committee of the democratic league made a proposal to reduce the consumption tax on oil products and reduce the transportation cost. Among them, it proposed to cut the consumption tax on diesel by half to 0.6 yuan per liter, which the country may adopt. Moreover, the market also said that even if the consumption tax does not fall, the price of oil may be revised because of the price adjustment mechanism and price reduction.

Will oil excise tax be reduced? First of all, this is related to the country's attitude towards the use of refined oil resources. The collection of consumption tax and continuous increase, is to suppress consumption and strengthen environmental protection. Therefore, whether the consumption tax is high or low has nothing to do with the proportion of consumption tax in the oil price, let alone the tax cut to encourage car owners to increase consumption of refined oil. As for the problem of fuel cost, when the oil price was relatively high, local governments had experience in reducing fuel cost for ship burning businesses, logistics enterprises and taxi industry. It was not necessary to reduce consumption tax to deal with it.

According to media reports, the national development and reform commission (NDRC) recently launched the implementation plan of promoting consumption of updated automobiles, home appliances and consumer electronics to promote circular economy development (2019-2020). "Encourage local governments to optimize the environment for automobile consumption," the draft said. We will study measures to increase taxes on consumption of refined oil products, and make new energy vehicles a better alternative to traditional fuel vehicles." It can be seen from the draft of the NDRC that the government's attitude towards the use of refined oil resources is clear, that is, to suppress automobile fuel consumption and promote the transfer of automobile fuel consumption to new energy, which is the government's real attitude towards automobile fuel consumption.

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Second, while introducing a series of tax cuts, the government must also carry out its duties for the whole government system and ensure the people's livelihood, such as housing, education, medical care, employment and old-age care. These expenditures are constantly increasing, under such pressure, the national fiscal deficit ratio has been rising, without the premise of new tax revenue, continue to reduce tax revenue will be more and more difficult. Therefore, even without considering the country's orientation on automobile fuel consumption mentioned above, it is unlikely to reduce the consumption tax on refined oil products by nearly 300 million tons just from the perspective of tax revenue.

How on earth do you understand the rumor that the current fuel price policy is being revised? Is it possible to revise the current policy of one adjustment every 10 working days with a link of more than 4% to overseas oil varieties?

First, we agree that the current pricing policy for refined oil products is transitional and further improvement is necessary. However, further liberalization of pricing rules for refined oil products needs to match the overall environment. For example, the further regulation of tax environment, the relative balance of domestic supply and demand. High oil price is not a necessary condition for further liberalization of oil price mechanism. In a certain sense, high oil price is an adverse condition for further liberalization of oil price policy.

Second, for many years, when the government decided to introduce a larger price policy for refined oil products, it often held hearings involving representatives of producers, consumers and the government. When the policy contents are relatively complex, expert meetings will be held to improve the transparency and scientific degree of product price management.

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