China to Tax Rare Earths

March 24th, 2011
in econ_news

rare earth elements Econintersect:  China will impose a tax on rare earth minerals from April 1, the Ministry of Finance and the State Administration of Taxation has told rare earth producers.

Zhang Zhong, general manager of the Baotou Steel Rare-Earth Hi-Tech Co, the country's leading rare earth producer, said the tax will increase the company's production costs by about 720 million yuan (US$109.7 million) this year.

Follow up:

Zhang also said the tax, imposed to protect rare earth resources, will benefit the company in the long run.  He said the statement about the tax that the company received said the rate for mined light rare earths is to be 60 yuan per ton, while that of medium and heavy rare earths is to be 30 yuan.

The company, headquartered in north China's Inner Mongolia Autonomous Region, is currently the world's biggest producer of rare earth magnets widely used for making electronic products such as computer hard drives and cordless tools.

Yang Wanxi, director of a rare earth expert panel of the Baotou Municipal Committee of Sciences, said taxes of rare earth minerals were currently levied under the category of ordinary non-ferrous metals, whose tax rates were between 0.5 and 3 yuan per ton.

Wanxi said prices of rare earths have been soaring since February, sometimes by 10,000 yuan per ton a day. The price of neodymium, a rare earth mineral used for making rare-earth magnets, increased to 600,000 yuan per ton (approximately $100,000 - U.S.) this week from 300,000 yuan per ton at the end of last year.  At current prices the new tax is about 0.01% of production value.  Using the $109.7 million cost cited by Zhang Zhong (above), the total annual production value would be $11 trillion.  This is double the GDP of China, so these numbers don't add up.  

The problem with the numbers aside, the government will use the tax to support research on rare-earth processing and application technology, set up environmental compensation funds or build rare earth reserves, Yang said.

The tax is one in a series of new measures unveiled this year by the Chinese authorities to upgrade the industry. The Ministry of Environmental Protection announced earlier this month that tougher rules on emission limits for producing rare earths will take effect in October.

Source:  Shanghai Daily 

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