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Finance ministry outlines energy tax statute plan

The Ministry of Finance yesterday released its draft of a proposed energy tax statute yesterday, which Minister of Finance Ho Chih-chin (何志欽) said could be implemented next January if passed by the legislature.

The energy tax, combined with the current commodity tax and vehicle fuel fee, would be imposed on eight categories of fuel, including gasoline, diesel, fuel oil and natural gas and would be raised annually until 2016.

According to the draft, the energy tax on gasoline and diesel oil would rise by NT$1 each year.

The commodity tax and vehicle fuel fee for gasoline, for example, is NT$9.33 per liter at present. Should the energy tax be levied next year, the tax would be NT$10.33 per liter, and NT$11.33 per liter in 2008.

Under the ministry's proposal, the energy tax for liquefied petroleum gas (LPG) would increase by NT$0.69 per kilogram each year, while the tax on natural gas would increase by NT$0.3 per cubic meter per year.

The incremental changes are designed to reduce the possible impact of the tax on the economy as well as account for inflation, the ministry said.

The energy tax amounts would remain unchanged after 2017.

Stressing that the proposed energy tax is not a tax hike, Ho said the plan would not dramatically raise tax revenues.

The ministry estimated that tax revenues in the first year of implementation could amount to NT$146.4 billion (US$4.45 billion) and NT$394.8 billion in the ninth year.

However, figures provided by the Bureau of Energy show that energy tax revenues during the first year would total NT$166.6 billion, affecting the nation's economy, gauged by the GDP growth, by 0.16 percentage points.

The ninth year's taxation could rise to NT$522.7 billion, weakening the economic growth by 1.77 percentage points, according to the bureau, which is under the Ministry of Economic Affairs.

If half of the tax revenues are used for public investment, it could boost the economic growth by 1.39 percentage points, the bureau said.

Ho said the proposed energy tax is in line with international trends as well as the consensus reached during last month's Conference on Sustaining Taiwan's Economic Development to promote energy efficiency and conservation.

Oil refiners are likely to pass on the cost of the new tax to consumers, since the market is monopolized by state-run Chinese Petroleum Corp (中油) and private rival Formosa Petrochemical Corp (台塑石化), said a finance ministry official who refused to be named.

In its next stage of tax reform, the finance ministry plans to abolish commodity taxes on rubber tires, drinks, plate glass and electric appliances.

Ho said the finance ministry plans to conduct a six-month analysis of inheritance and gift tax reform, beginning in October.
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