China to tax sale and production of rare earth

China is looking to allocate a value-added tax (VAT) permit to all rare earth companies in a desperate effort to curb resource plundering, dangerous artisanal mining and widespread pollution, as well as collecting revenue.

By forcing rare earth producers out of business, provided they don’t qualify for the new value-added tax permits being allocated, Beijing will have full control over which companies are exporting rare earths and what quantities they can export, warns a report released Friday by research firm Paragon Report.

According to the statement, a Shanghai trader told Platts “the new rule will help regulate the market supply to some extent, as rare earth producers will need to sell their finished products according to their output and export quotas in accordance with the new special invoice.”

"We believe it is a start that China will undertake to regulate the country's rare earth production, however there is a long way to go," the source added.

China produces over 95% of the world’s REEs used in a variety of industries including green technology, defence systems and consumer electronics and the country's monopoly is currently before the World Trade Organization for arbitration.

The Ministry of Industry and Information Technology in China, reports Mineweb, is also considering a national inventory reserve of rare earths and will look at strategic imports and exports, where producers buy up surplus supply when prices fall and sell when prices rise.

Paragon’s reports says rare earth companies in Sichuan and Inner Mongolia will be the first ones to be allocated the VAT permits, in a bid to regulate the overproduction of the mineral. Companies that have received notification from the government said the State Administration of Taxation would issue the tax permit this week.