Excise Tax Exemption for Naphtha     

The State Administration of Taxation announced on May 26th that China exempts the consumption tax for naphtha players, effective from 2008 to 2010. The consumption tax is not imposed for naphtha importers and the producers that use naphtha as raw material for ethylene and aromatics. The measure will stimulate imports of naphtha to fill the gap of domestic resources and ease the serious raw material shortage in the ethylene sector in China.
    According to experts, with completion of new or expansion ethylene projects before 2010, the demand for naphtha in China will greatly increase. The output growth of naphtha will however be lower than the demand growth of naphtha. Such new and expansion ethylene projects include the 1.0 million t/a project in Zhenhai (Zhejiang province), the 800 000 t/a project in Fujian province, the 590 000 t/a expansion project in Guangzhou Petrochemical Co., Ltd. and the 1.0 million t/a project in Tianjin Petrochemical Co., Ltd.
   Raw material shortage drove a drastic price rise of ethylene in 2007. Downstream enterprises producing the washing products and plastic products had to increase prices or discontinue production.
   Experts say that the exemption of the consumption tax on naphtha for ethylene and aromatics can directly reduce the production cost of ethylene, facilitate the operation of ethylene projects in refineries, minimize the manufacturing cost of downstream plastic and rubber products and promote the development of organic chemical sectors.