The long-delayed tax on retail sales of gasoline is coming but the legislative affairs office of the Chinese cabinet said the government is waiting for appropriate market conditions.

The government is keeping a close watch on international oil prices and is still trying to determine how the tax revenue will be split, the unnamed cabinet official said.

Rising oil prices have caused the price of retail gasoline to jump significantly and the government is worried about imposing the new tariff that would again pump up the cost of gasoline.

China has intended to replace its annual road maintenance fees charged to vehicle owners with a gas tax in a law that was passed in 1997 but never put into effect. Experts believe that imposing a new gas tax would negatively impact China's consumer price index and create a new burden for the country's millions of farmers.

According to the Ministry of Finance, Chinese farmers spent 30 billion yuan (US$3.8 billion) on diesel oil in 2002. The sum doubled to 60 billion yuan (US$7.6 billion) in 2004.

Some analysts say the tax has not been implemented because a decision has to be made on how the revenue will be distributed between central and local government departments.

A fuel tax is also expected to help curb gas consumption. While the road maintenance fee is applied to all vehicles no matter how much they are driven, a tax on each liter of gas will increase the per-kilometer cost of driving and help persuade people to use public transportation.

The official said the law passed in the 1990s gives the government the right to continue to collect road maintenance fees until the new tax on gas is implemented.

Several local transportation bureaus are being sued by drivers who say the government lost the right to collect the road maintenance fee when the law was changed in the 1990s. They have asked the government to reimburse them for the past fees they have paid.

The cabinet official said that about 45 percent of the revenues collected from car owners since 2003 were used to improve highways. Just over 30 percent of the money went to new highway construction, regular maintenance and road construction in rural areas.

(Xinhua News Agency November 24, 2006)