Fuel Tax Software China's Processed Oil Price Fell By 32.1USD/ton On 29th, July

www.shcri.com - On July 28th, 2008, China's Development and Reform Commission issued a notice of lowering processed oil price -- cut off 220 RMB/ ton (32.1 USD). The adjusted prices of gasoline and diesel were 6,510 RMB/ton (950.4 USD) and 5,770 RMB/ton (842.3 USD) respectively, equivalent to 0.16 RMB/L and 0.19 RMB/L from 0:00 on July 29th, 2009. This is the second price reduction of Chinese refined oil in 2009, and also the first reduction of refined oil price after the publication of the new price adjustment mechanism.

Market is the first to respond; in all parts of China, the wholesale price of refined oil has already dropped. Recently China's wholesale price of refined oil dropped continuously; therefore the market profit space of wholesale markets has been greatly compressed. The wholesale prices of refined oil throughout China have been diving sharply; the average decline was between 500-600 RMB / tons.

Behind the cutting of prices is the weak demand. A few days ago, statistics of production and operation released by China's largest processed oil seller -- China Petroleum & Chemical Corporation shown that the whole sales volume for domestic oil products fell by more than 8% in the first half of 2009, with a decrease of almost 6 million tons; with the largest decline rate in retail sales volume of 12.77%.

According to "Oil Pricing Mechanism", which published by Chinese government on May 8th, 2009, the adjustment of domestic oil products prices would be made when the average international market price of crude oil has been changing more than 4% for 22 days. On July 28th, the price in September crude oil futures contracts was about 67 USD/barrel on the international benchmark of oil prices in New York Exchange, and in the last domestic oil products price adjustment (on June 30th) the quote was about 70 USD / barrel, cut about 4%.

July 28th was just 22 working days from June 30th when China's National Development and Reform Commission raised the price of refined oil. Monitoring data showed that as far as July 24th , in three regions such as Brent, Dubai, Cinta the change rate of average crude oil price have reached -5.41%, with a decrease rate of more than 5%.

China Development and Reform Commission announced that after this price cut, the Chinese domestic refined oil prices remained more than 7 USD higher than international oil prices, and much lower than the three types of reference prices. However, many people questioned that on June 1st and June 29th, China National Development and Reform Commission twice raised the price of refined oil prices by about 6% and 9% respectively, while at this time the price-cut range is only 4%, which means that the decline rate of domestic refined oil prices cannot keep up with that of international oil prices. Therefore it cannot change people's questioning for "fast increase and slow decrease".

The Change Events of China's Refined Oil Price Since 2009:

? on Jan 14th, gasoline and diesel prices decreased by 140 RMB/ton and 160 RMB /ton respectively 

? on March 25th , gasoline and diesel prices increased by 290RMB /ton and 180 RMB /ton respectively

? on June 1st , the price of petrol and diesel were increased by 400 RMB /ton respectively

?on June 30th , products such as gasoline and diesel oil prices both increased 600 RMB /ton

?on July 28th , gasoline and diesel prices reduced 220 RMB/ton respectively

 

Since China officially launched the fuel tax reform this year, oil prices have been adjusted for 5 times, the increase rate far exceeded the decline rate.

Take the ex-factory price of gasoline as an example, on January 14th and July 28th the price went down by 140 RMB/ton and 220 RMB/ton respectively, but on March 25th, June 1st and June 30th it was raised by 290 RMB/ton, 400 RMB/ton and 600 RMB/ton respectively. By integration calculation, gasoline prices in China have raised 930 RMB/ton this year (135.8 USD/ ton.)

 

Source: China Research and Intelligence

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Fuel Tax Software How To Pay Less Tax By Claiming Mileage Allowance Expenses

First examine the facts as they exist in the current financial year 2007-08. The current approved mileage allowances were set five years ago in the financial year 2002-03 and while the current rates in no way reflect the increases in fuel costs in recent years that all businesses including small business. The Inland Revenue is actually considering a revised scale of tax allowances that may even lower the overall amount that can be claimed which will be detrimental to small business.



The approved mileage allowance for cars and vans is 40p per mile for the first 10,000 business miles and 25p per mile for each business mile over 10,000 miles in each tax year. The approved mileage allowance for motor cycles is 24p per mile for the first 10,000 business miles and 24p per mile for each business mile over 10,000 miles in each tax year. The approved mileage allowance for bicycles is 20p per mile for the first 10,000 business miles and 20p per mile for each business mile over 10,000 miles in each tax year.



These approved mileage allowances demonstrate complete irrelevance to the actual costs incurred in performing the business journey. The purchase price of a new motor vehicle would not be unusually 100 times the price of a bicycle, plus vehicle maintenance costs, vehicle insurance, licence fees and substantial fuel charges in operating the motor vehicle compared with zero costs for a bicycle. Few small businesses claim tax allowances for bicycle business journeys in their small business accounts.



The startling anomaly is that vehicle allowances are only twice the bicycle rate on the first 10,000 miles and only 25% more over 10,000 miles. Not that many people are likely to use a bicycle and cover in excess of 10,000 business miles in a single tax year.



In addition to the approved mileage allowances an additional 5p per business mile may also be claimed as a tax free expense if a fellow passenger is also carried on the business journey in the small business accounting records. That fellow passenger must also be on a work journey to enable the mileage allowance to be claimed in the small business accounts



Generally there are specific rules on justifying a business journey and the information that must be supplied to support the claim for a tax free mileage allowance. In practise the Inland Revenue often take a reasonable view of any claims provided the information provided in the small business accounts indicates that the claim is valid and has been incurred for real business journeys as opposed to an invention by the claimant.



When claiming a mileage allowance the essential information to provide is the date of the journey, the reason for that journey, the place visited and the actual mileage covered. Small businesses who claim this tax free allowance should maintain detailed records as part of the small business accounting to substantiate their expense claim should it later be challenged by the tax authority. Devising an expense sheet and submitting this sheet to the business is one way of ensuring sufficient documentation exists within the small business accounts.



Another way a small business can substantiate a mileage allowance expense claim is to enter each journey directly into the accounts for small businesses, perhaps recording the mileage against either sales invoices to customers or against purchase invoices from suppliers. With these transactions having already been recorded in the small business accounting records with a date, the location also stated on the invoice and the purpose of the journey being obvious the rules on supporting information are covered.



That is the easy part of making a valid claim but for many small businesses making such claims would seriously understate the true level of business journeys. Therefore also include in the small business accounts all other business journeys undertaken which may or may not have resulted in a specific purchase or a specific sale.



So what other journeys can the small business accounting system claim as a deductible expense against the taxable profit. The answer is basically any business journey and that should include all incidental journeys, perhaps visiting a supplier or a customer, visiting customers to quote for work, attending a business meeting, taking money to the bank.



Mileage allowances cannot be claimed for a business vehicle where the running costs of that vehicle are being claimed as a deduction from net taxable profits. Vehicle running costs include the capital tax allowances, licence fees, insurance, repairs and maintenance, membership of breakdown services and fuel costs.



Many small businesses may find that more than one vehicle is used for business journeys. The business vehicle running costs may be claimed for a specific business vehicle on which mileage allowances are not claimed this tax allowances may be claimed for the use of a private vehicle in the small business accounts.



Perhaps the small business runs a van for its main business and the running costs exceed the potential mileage allowance in which case the business should claim the vehicle running costs. If a different private vehicle is also used for some business journeys, perhaps even a spouse taking cheques to the bank, then mileage allowances could be claimed for that journey.



Each business should examine their tax allowance practises to ensure the maximum tax free allowance is claimed and supported with the required documentation to lower the tax burden when preparing the small business accounts.