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China To Levy 1-yuan-a-lit Fuel Tax From Jan 1

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Shanghai, December 8, 2008: ( China plans to levy a fuel tax of one yuan ($0.15) per liter starting Jan. 1, according to a draft plan produced jointly by its several ministries, state media reported. In addition, the government has also decided to abolish toll fees on 60% of the toll roads in the country.

According to the new fuel tax plan unveiled on Friday, vehicle owners in China would be required to pay the tax on gasoline being raised from 0.2 yuan to one yuan per liter, and diesel tax going up to 0.8 yuan from 0.1 yuan per liter. The plan, scheduled to take effect on Jan. 1, adds that six toll fees, currently being charged for road or waterway maintenance and management, would be completely scrapped.

The government on Saturday explained that pump prices won't be raised and the reform won't increase costs for fuel consumers. The tax is already reflected in pump prices and won't mean an additional increase in retail prices, said a joint statement by the National Development and Reform Commission, the Ministry of Finance, the Ministry of Transport and the State Administration of Taxation.

As toll taxes on second-tier roads are gradually eliminated, more than half of the fee-charging roads would become toll free. The second-tier toll roads account for more than 60% of all toll roads in the country, said the joint statement. The move to eliminate taxes on second-tier roads will help reduce the tax burden on ordinary drivers.

The fuel-consumption tax hike is designed to urge motorists to drive less and buy fuel-efficient cars. There will be a ceiling on pump prices as part of the plan. The government said it will continue to monitor and regulate domestic pump prices.

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