On August 26, the 12th meeting of the Standing Committee of the 13th National People's Congress passed the Resource Tax Law of the People's Republic of China, which will come into effect on September 1, 2020. The Provisional Regulations of the People's Republic of China on Resource Tax, issued by the State Council on December 25, 1993, were simultaneously abolished. According to the new law, the tax rate for light rare earth beneficiation in the field of rare earth is 7% to 12%; The tax rate for medium and heavy rare earth ore dressing is 20%.

In the past, China has implemented both quantity and price based taxation on rare earths, and local governments have also formulated corresponding measures to collect taxes and fees. Now, the Resource Tax has upgraded the Provisional Regulations to the Resource Tax Law and clarified the mineral processing tax rates for light, medium, and heavy rare earths. The objective effect is to increase the tax rate level for related resources.

In fact, a very important point in the Resource Tax Law is the establishment of a "resource tax generally levied on a price basis", which will inevitably have a profound impact on accelerating the establishment and improvement of a standardized, fair, reasonably regulated, and efficient resource tax system in the rare earth industry, and playing the role of resource tax in promoting resource conservation, intensive utilization, and ecological environment protection.

Firstly, the implementation of resource tax based on price can maximize the functional role of resource tax in promoting optimal resource allocation. The implementation of resource tax under the price based taxation method can form an automatic adjustment mechanism linked to resource prices. Therefore, by moderately and effectively adjusting the income level of resource differentials, it can promote fair competition among enterprises, promote comprehensive resource conservation and recycling, and improve resource allocation efficiency.

Secondly, to standardize from the source and strengthen supervision and management to protect the sustainable development of domestic resource development and utilization; It can prevent mining enterprises from "mining rich and abandoning poor", causing waste of mineral resources, and promote rare earth mining enterprises to fully exploit mineral resources, in order to improve the profits of mines; By increasing the cost of resource extraction, eliminating backward enterprises, promoting strong alliances and technological innovation, and promoting industrial upgrading.

Thirdly, in the future, the rare earth resource tax will be changed from quantitative to pricing, which can play a role in adapting to the market, and the sensitivity of resource tax regulation will relatively increase. In the future, the price of rare earths will be more determined by the market. In the current situation where there is a general oversupply of rare earths, even if resource tax rates are raised, it will be difficult to increase the price of rare earths; On the contrary, even if the resource tax burden is reduced, it is difficult to lower the price of rare earths under conditions of supply shortage.

In recent years, some local governments have established various miscellaneous taxes, which have increased the burden on rare earth enterprises. According to the Economic Reference Daily, resource tax rates have always been set by local governments, especially in southern provinces where medium and heavy rare earths are the main component. Taking Jiangxi as an example, the resource tax burden is 36000 yuan/ton, while Guangxi is only 6000 yuan/ton. Resource tax reform will narrow this gap and make the market environment more fair.

Objectively speaking, China's tax system reform and adjustment have to varying degrees aimed at achieving the goal of fair tax burden for rare earth enterprises, including state-owned enterprises, collective enterprises, private enterprises, joint-stock enterprises, etc., in order to promote the participation of various types of enterprises in fair competition. Because tax burden fairness and fair competition are directly proportional, only the closer the tax burden is to fairness will competition become closer to fairness.

For rare earths, due to long-term internal competition in China, the price discourse power is not high. By increasing resource tax rates, the price discourse power can be appropriately increased. Resource tax can increase the domestic and international market prices of rare earths from the source, reflecting the scarcity of resources and the environmental costs of mining. By changing the supply and demand relationship through price increases, it can effectively reduce smuggling and other countries purchasing and hoarding rare earths. (From China Nonferrous Metals)