NONFERROUS METALS：REFORM OF MINING ROYALTIES SYSTEM FOR BETTER RESOURCE UTILIZATION
Recently, the State Council issued a plan1 to reform the mining royalties system in a bid to tailor the systemto domestic conditions, protect the value of mineral resources and create a fair environment for the mining sector.
Basic principles: 1） to improve the taxation system in the mining sector, promote competition in the transfer ofmining rights, fairly allocate mining revenue, and curb unlawful & excessive mining and sales of resources atunreasonably low prices; 2） to call for mining names to effectively utilize resources and preserve the environment; and,3） to align the interests of state-owned resources & assets with those of local communities and fairly determine thedistribution of mining revenue between central and local governments.
Reform measures for the transfer and use of mining rights as well as the E&P and recovery of mines:
1） to record the charges for E&P rights as income for transferring mining rights; 2） replace the existing fixed E&P fee,which is charged annually based on the size of the mine, with a new dynamic user charge for mining rights based onmineral prices and demand for economic development; 3） a resource tax will continue to be imposed on mining; and,4） for environmental remediation, the deposit system will be changed into a fund system.
To adjust the revenue allocation ratio between central and local governments: 1） the revenue sharing ratiofor mining rights transfer income will be adjusted from 2:8 to 4:6 between central and local governments, which mayreduce local governments’ revenue by ~Rmb2.04bn p.a.; 2） revenue sharing for mining rights adjusted to 2:8 betweencentral and local governments, increasing local revenue by ~Rmb900mn p.a.; and, 3） the mineral resourcecompensation fee will all go to local governments vs. the previous 5:5 split between central and local, which mayincrease local revenue by Rmb4.51bn. Together, all these measures may boost local governments’ revenueby Rmb3.37bn.
To emphasize the accountability system for environmental preservation. The deposit system forenvironmental protection and treatment will be changed into a fund system. Mining companies should make provisionfor this fund based on a certain share of their sales revenue and record it as an independent entry in costs.
Not to increase corporate burden: 1） for the transfer of mining rights through auction, corporate burden will notchange; and, 2） for transfer via other methods, corporate burden may increase, but this may contribute to fairercompetition, as well as protect & save resources. The fee for transferring mining rights can be settled in installments.
Policy implementation misses expectations.
□ .Y.u.b.o. .D.O.N.G./.Y.a.n. .C.H.E.N .中.国.国.际.金.融.股.份.有.限.公.司