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"Selecting the right time to launch the fuel tax" has almost become a clich used to address people's concerns about when China will introduce the long-awaited tax system.

 

This term was reiterated in a report by the Ministry of Finance at the Fifth Session of the 10th National People's Congress. The report stressed that the fuel tax adoption process will be accelerated in 2007, and the fuel tax will be launched "at the right time".

 

Many questions surround when "the right time" will be and what will make that "the right time". Most grassroots consumers agree that an acceptable oil price seems to be the most important factor in determining "the right time".

 

According to the State Information Center's forecasts, the average global oil price will rise to a comparatively high level of US$55 to US$65 per barrel this year. Such a prediction suggests that the chances that the authorities will pass the fuel tax resolution in 2007 are slim.

 

China reportedly came up with a fuel tax collection proposal around 2001, but the "high" oil price (more than US$20 per barrel) at that time caused authorities to hesitate in making a decision. The question then arises: with global crude oil prices soaring to more than US$60 per barrel, how can authorities adopt a fuel tax system that would for grassroots consumers at least further increase the already lofty gasoline and diesel prices?

 

Opposition from certain government departments is another key reason China has not yet adopted a national fuel taxation mechanism.

 

Every year, car owners in China pay road maintenance fees to all levels of the transportation administration.

 

If the fee is replaced by a fuel tax, transportation watchdogs will have less income to work with, making it difficult for the authorities to strike a balance between national and departmental interests.

 

Also, the State has started collecting road maintenance fees for 2007, which most likely means that fuel tax collection is not feasible this year, despite the Ministry of Finance's report.

 

Wu Jinglian, a renowned economist with the Development Research Center (DRC) under the State Council, called for the adoption of a fuel tax as soon as possible to curb oil consumption and enhance environmental awareness.

 

However, planners should consider the negative impacts the oil price hike and oil tax will have on normal people's daily lives and the auto industry's operations.

 

(China Daily March 7, 2007)