New oil-import tax to fund R&D of alternative energy

The government will levy a 5.23 percent tax on oil imports with NT$10 billion in expected annual revenue going to ensure national supplies and fund the research and development of alternative energy sources, according to officials.

"The new tax will add on a charge of NT$303 for every kiloliter of imported crude, NT$370 for every kiloliter of gasoline and NT$319 for diesel," said Wang Yun-ming (王運銘), spokesman for the Cabinet-level Energy Commission.

The new fund, which was created when the Petroleum Management Law (石油管理法) was passed last September, came into effect on Jan. 1, with the new tax being charged retroactively, according to the commission.

The government expects annual revenue for the fund to hit NT$10 billion, of which NT$7 billion will go to maintaining national security oil reserves and NT$2.4 billion will be allocated to encourage firms to research and develop alternative energy sources and explore for new oil and natural gas sources, Wang said.

Another NT$400 million will go to help subsidize the costs of transporting petroleum and diesel to towns on outlying islands and in remote mountain villages, with the remaining NT$100 million going to stamping out illegal underground gasoline sellers, Wang said.

The new tax, which will contribute to the National Petroleum Fund (石油基金), will increase costs for state-run Chinese Petroleum Corp (中油) by around NT$0.315 per liter of gasoline and NT$0.277 per liter of diesel, according to Chinese Petroleum officials.

"The increase is the difference between the new tax and the contribution Chinese Petroleum had to make to the National Energy Fund (能源基金), which served essentially the same purpose as the new fund," Wang said.

The state-run Taiwan Power Co (台電) is the only contributor to that fund, which will be dissolved once the power industry is liberalized.

According to Wang, the free market mechanism will determine whether oil companies pass on the increased costs to motorists.

A Chinese Petroleum spokesman said there has been no decision on how the higher costs will affect prices at the pumps, saying only that the "environment is becoming increasingly challenging."

The local media, however, quoted officials from Chinese Petroleum and Formosa Petroleum Corp (台塑石化) as saying the cost was fair as it is shared by all companies and that a retail price increase would not be necessary for now.