China to ease tax pressure on oil producers   

中國版石油暴利稅降低 三桶油每年將減負超300億

This graphic shows tax bills of China's three giant oil producers. (Photo source: Chinanews.com)

(ECNS) - Starting on January 1, 2015, China will raise the threshold for a windfall tax on crude oil to $65 a barrel from $55, according to a statement published Sunday on the Finance Ministry website. 

"It's an encouraging policy move by the government, because the oil price slump is putting a lot of pressure on cash flow," Lv Dapeng, spokesman for China Petroleum & Chemical Corp, was quoted by Beijing News as saying on Monday. 

Prices have slumped 46 percent this year as members of the Organization of Petroleum Exporting Countries have resisted supply cuts to defend market share, while the United States is pumping at the highest level in more than three decades. 

"The move to cut oil company tax bills was not only because of falling oil prices, but also the increasing cost of oil exploration," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. "Accommodating struggling producers will protect the incentive to invest." 

Raising the tax threshold would increase the profits of the biggest three Chinese oil companies — PetroChina, China Petroleum & Chemical Corp, and CNOOC — by at least 10 percent, or 30 billion yuan ($4.8 billion), next year, if other factors are unchanged.

About three years ago, China boosted the threshold from $40 a barrel to $55. The levy was introduced in 2006.