Reuters News agency reported Friday that the Chinese government has issued details on a new resource tax structure for producers of rare earth elements. Where the government’s take was previously based on volume, the new pricing scheme taxes operators based on price. Light Rare Earths will be taxed at 7.5% - 11% of their sale price, depending on the region, and more valuable Heavy Rare Earths are being taxed at a rate of 27%.
While the full implications of these changes are yet unknown, it seems certain that a price-based tax system will ultimately add cost to the final product.
The 27% tax on heavy rare earths underlines the importance of those minerals to the materials sector, especially in emerging technologies, their relative value and their relative scarcity. This production tax replaces a recently repealed export tax.
The effect that the new tax structure will have on the economics of Chinese rare earth projects remains to be seen.
