China explained more on fuel consumption taxes hikes Friday after revealing a seven- to eight-fold increase on gasoline and diesel products a day earlier, part of a reform of fuel taxation and pricing approved along with slashing retail fuel prices.

Consumption tax on naphtha, solvents and lubricant oil would be raised from 0.2 yuan (almost three U.S. cents) to one yuan per liter, and tax on jet kerosene and fuel oil would rise from 0.1 yuan to 0.8 yuan per liter, the Ministry of Finance (MOF) and Ministry of Taxation said in a joint statement Friday, offering more details of the day-earlier announcement.

The National Development and Reform Commission said late Thursday that the country will raise the gasoline consumption tax from the current 0.2 yuan to one yuan per liter and diesel consumption tax from 0.1 yuan to 0.8 yuan per liter.

The two ministries also said consumption tax on imported naphtha would be reinstalled, while tax on jet kerosene would be temporarily postponed.

In addition, consumption tax on naphtha produced domestically and used for production of ethylene and aromatic hydrocarbon products would be exempt by the end of 2010, according to the statement. Tax already paid on imported naphtha for the same usages would be returned, it added.

The ministries said the country would exempt consumption tax on ethanol gasoline produced with imported and already-taxed domestic oil, and ethanol gasoline produced with domestic gasoline would be taxed for gasoline used in the production only.

Taxes on gasoline and diesel products used in producing methanol and biodiesel products could be deducted from the total tax for the finished products, the two ministries said.

Ethanol gasoline, methanol gasoline and biodiesel products are all mixture of gasoline or diesel with ethanol, methanol or biodiesel.

An unidentified MOF official said such adjustments of consumption taxes on fuel products are aimed to play a role in promoting energy conserving and economic restructuring, and ensuring equal share of tax burdens among users.

(Xinhua News Agency December 19, 2008)