China’s latest taxation scheme could jeopardise the domestic LPG market.
New fuel consumption tax rules, which will become effective on 1 January 2013, could put China’s domestic LPG market at risk. The State Administration of Taxation announced in early December that it would be clamping down on refineries, traders and other operators whom it believes to be evading tax by blending fuels and declaring them under other names.
LPG sales could be hit by the new regulations Image: Joybot |
Existing taxes for listed oil products, like gasoline, diesel, naphtha, lubricants, jet/kerosene solvents, would remain intact, however new taxes will now be added to all products matching these specifications produced from crude oil.
LPG was not directly identified by the tax office, however analysts are concerned that between 50% and 60% of the nation’s LPG is used for making aromatics, which are then blended with gasoline. Under the new guidelines, this LPG would be liable for taxation.
Some 60% of LPG in China is used by households, where it is already vying for market share with cheap natural gas. In China’s current 5-year-plan, natural gas consumption is slated to double, which would further impinge on LPG usage.
Despite imports rising 20% between January and October 2012, Sinopec, Asia’s largest refiner, expects LPG demand to fall by 0.5% annually over the 2010-2020 period, with demand bottoming out at 22.2 mt by 2020.