China considering rare earth export tax increase

Quoting “an industry source,” China Daily reported Wednesday that several ministries “are discussing heavier taxes on rare earth producers, and an announcement on the changes will probably be made” in the second half of this year.

SinoCast reported Tuesday that “people in the know” disclosed those Chinese central government ministries included the Ministry of Industry, the Ministry of Finance and the State Administration of Taxation.

The policy changes under consideration would base taxation on the value of the rare earths produced, rather than on volume as is now practiced.

Chinese officials hope that the shift in taxation policy would result in higher prices at the producer level, which “will alter the supply-demand balance, undercut the smuggling trade and reduce high inventories of rare earths overseas, said the [unidentified] expert.”

Other steps, such as environmental compliance certificates, are likely to be required for exports, the source said.

Rare earths metals prices were weak in 2013, which impacted Chinese rare earths producers, who supply more than 90% of REE global demand.

The source also cited data which suggested that China's rare earth reserves amount to only 27 million tonnes, accounting for 30% of the global reserves — the figure was previously pegged at 70%, reports Beijing’s Economic Information Daily.

Based on current production rates, China's medium and heavy rare earth reserves will only last for 15 to 20 years, after which the country might have to rely on imports for its own needs, according to the source, cited by Economic Information Daily.

The WTO ruled in March that China has violated WTO trade rules in regards to measures imposed on rare earths exports. China Daily suggested that, “As a result of the WTO ruling, it is very likely that China will lift export tariffs.” Actual export volumes have fallen short of quotas in the past few years.

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