China will cut the rate of value-added tax (VAT) on dimethyl ether (DME), a coal-based alternative to oil, to help boost the development of alternative energy amid soaring world energy prices.

The Ministry of Finance and State Administration of Taxation jointly announced on Monday that the government will cut the VAT rate on DME by 4.0 percentage points, to 13 percent, effective Tuesday.

The adjustment removes the gap between the VAT rate levied on DME and other fuels, including liquefied gas and natural gas. The move will help the development of the DME industry, said experts.

China is accelerating the use of DME-powered buses. Shanghai, for example, planned to put 90 more such buses into operation this year, up from 10 last year. It expected to have 1,000 such vehicles running in the city by 2010.

(Xinhua News Agency July 1, 2008)