I have a question regarding the consumption tax on coal-to-oil projects
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Theoretically, a consumption tax is an embedded tax, and it is ultimately passed on to consumers. What are the sales channels through which the oils produced by coal-to-oil companies reach the end consumers, and what is the mechanism by which prices are transmitted? Why does the consumption tax impose such a heavy burden on coal-to-oil companies? Can’t it be passed on? Why are there repeated calls for reducing consumption taxes on coal-to-oil enterprises?
Domestic goods all come with taxes included, and whether these taxes can be passed on depends on the selling price. Oil prices are set by the National Development and Reform Commission (including taxes), with the reference point being the costs of petroleum refining, to which a tax is added. The cost of producing oil from coal is higher than that of petroleum, and with the same taxes, it’s of course difficult to operate. Coal-to-oil companies want tax cuts – will the petrochemical industry agree? They also want to cut costs; looking at the wholesale prices for locally produced fuel, even Grade 4 No. 97 fuel doesn’t exceed 5,000 yuan per ton. Not to mention diesel; if oil prices don’t rise, the situation for coal-to-oil production won’t improve.
I get it roughly – the selling price of oil is set by the National Development and Reform Commission. The cost of oil includes the cost of raw materials, refining costs, transportation costs, and taxes. When comparing refining with coal-to-oil production, the costs related to refining and transportation are higher in the case of coal-to-oil production. Now that oil prices have fallen, the cost advantage associated with coal as a raw material, which was originally anticipated, no longer exists. If one doesn’t use some creativity when it comes to taxes and fees, coal-to-oil production can turn into a bottomless pit for the company.