Agence France-Presse . Shanghai

China began charging the full consumption tax on fuel oil and three other oil products retroactively from January 1, tripling the previous level of taxation, state media reported Wednesday.

The government raised the consumption tax for fuel oil to 0.1 yuan (1 US cent) per litre after having collected only 30 per cent of the tax since it was first introduced in April 2006, the China Securities Journal said.

The paper cited a joint statement from the finance ministry and tax administration. Naptha, a feedstock for producing high octane gasoline and other petrochemical products, lubricants and solvent oil, would also be charged at a full rate of 0.2 yuan per litre, according to the statement.

China started levying a consumption tax on the four oil products almost two years ago as part of efforts to encourage energy saving and curb development of highly polluting and resource-intensive sectors. But the timing of the latest move came as a surprise to many analysts, who pointed out China is now experiencing its worst inflation in over 11 years.

Consumer prices were up 7.1 per cent in January from a year earlier. 'I cannot figure out what the intention of the policy makers is in selecting such a timing to charge the full tax rate,' said Wang Jing, an analyst with Oriental Securities.

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