Background

Beijing is the capital city of China with a population of more than 19.72 million. There are over 5 million private vehicles in Beijing and traffic congestion is very common in rush hours. Although the bus system (there are 62026 buses in Beijing) and subway system (16 subway lines) in Beijing are very busy, people still complain about the traffic jam. There are three major policies to reduce traffic congestion and I believe some of them are very useful. The three major policies are: cheap public transport system, odd-even license plate system and license quota system. These policies were introduced by Mayor Wang Qishan who is from the Communist Party of China, the ruling party in China. Because of the Beijing Olympic games in 2008, Beijing government decided to reduce traffic congestion and reward Beijing citizens.

The goals of these policies are the same: Reducing traffic volume in certain areas (from 1^st Ring Road to 5^th Ring Road), reducing carbon emission and encouraging residents to use public transport system.

Implementation

Cheap Public Transport System:

From Oct 7^th, 2007, it was announced that bus ticket price is ¥0.4 for adults and ¥0.2 for students. The subway ticket price is ¥2 for all zones. In order to show how cheap the price is, I’d like to show some numbers. In 2011, real GDP per capita in Beijing is ¥80394. A Big Mac is ¥15 and a bottle of 2 litres coke is ¥6.5. In Vancouver, the price of a Big Mac is about $5 and a bottle of coke is about $2.5. That means, a bus ticket price for adults is just like $0.1 in Vancouver and a bus ticket for students is even less than $0.05. The ticket price of all zones subway is $0.67. We can see how cheap the ticket price is.

Odd-even License Plate System:

From August 17^th, 2007, Beijing government announced that odd-even license plate system was implemented. You can drive freely on weekends and holidays but can’t drive your car within the 5^th ring road, if:

On Monday, if tail number of license plate is 0 and 5;

On Tuesday, if tail number of license plate is 1 and 6;

On Wednesday, if tail number of license plate is 2 and 7;

On Thursday, if tail number of license plate is 3 and 8;

On Friday, if tail number of license plate is 4 and 9. [1]

License Quota System:

From Jan 1^st, 2011, the license quota system was implemented and everyone who wants to buy a car in Beijing must register by the first eight days of every month and only 17,600 applicants can get the quota every month. The government uses computer to randomly choose the “lucky” applicants and there are 563,645 applicants every month. So, only 3% applicants can get the quota. If you get the quota but don’t buy a car within 6 months, the quota will expire.

Coverage

For odd-even license plate system, there are some vehicles that do not need to be covered in the policy. Police cars, ambulance, school bus, engineering rescue vehicles, gardening vehicles, taxis, buses, fire trucks, and law enforcement vehicles are not covered in the policy. For license quota system, only applicants who live in Beijing without cars can apply for the quota. 88% of the total quota was given to private buyers, 2% of the quota was given to bus system and 10% of the quota was given to private and public companies.

Distributional Impacts

Cheap public transport system is good for poor and middle class people. With the cheapest ticket price in China, people in Beijing like to travel by public transport if it is unnecessary to drive private cars. Rich people, however, don’t care about the low price of public transport because they like the convenience of driving cars. Odd-even license plate system is fair to everyone, no matter you are rich or not, if today your car is limited to drive, you are not allowed to drive. However, some people want to buy second cars so they can drive every day. Of course this is not a common issue, however, if rich people buy second cars, there will be more cars in Beijing and the traffic congestion will increase. So, the policy of license quota system was introduced to solve the problem. With the quota, every applicant has the same opportunity to buy a car. Since the quota is randomly distributed and only people without cars can get the quota, rich people can’t get the “privilege” of owning two cars.

Cost-Effectiveness

In order to keep Cheap Public Transport System, the net cost of Beijing government is ¥13.8 billion [2].(about 2.23 billion CAD) every year. Compare with other cities, the low price policy benefits at least 80% citizens in Beijing and it is a good way to reduce traffic congestion because people can use the convenient public transport system almost freely. However, some people argued that it can be more cost-efficient if the money paid to the public transport system can be used to benefit specific groups. For example, the money can be used to support poor students and patients. However, as a policy to benefit everyone and reduce traffic volume, Cheap Public Transport System policy is successful. Beijing government did a survey to see if it is possible to increase the ticket price a little and most people said they will still use public transport system even the price is higher. Odd-even license plate system is a direct way to reduce traffic congestion. Although it can make some people feel inconvenient in one day of a week, it is still a good policy. People can use public transport and there will be about 1 million cars have to “rest”. It is very helpful to reduce the traffic jam when 1 million drivers are not allowed to drive every day. License quota system is also a direct way to reduce traffic jams. In 2011, about 617,000 applicants can’t buy cars because they don’t have the quota. [3] This is very impressive and it is believed this policy can cause a loss of ¥100 billion (about $16.13 billion) to local dealers, automakers and government revenue. However, Beijing government insists the policy because it is a good way to reduce vehicle increasing. It is the price of reducing traffic congestion.

Conclusion

There are three major policies in Beijing to reduce traffic jam: cheap public transport system, odd-even license plate system and license quota system. Cheap public transport system can benefit everyone in Beijing and it is like a tax return to everyone. Odd-even license plate system is a good way to reduce 20% cars on the road with zero cost. The cost effectiveness is very good. License quota system is very expensive because the quota will reduce vehicle consumptions.

Reference

[1]. The official website of Beijing Traffic Management Office: http://www.bjjtgl.gov.cn/zhuanti/10weihao/index.html

[2]. In 2012, the government subsidy for Beijing public transport system is ¥13.82 billion: http://auto.163.com/13/0126/19/8M5SUKBQ00084IK8.html

[3]. The official website of vehicle quota management Office: http://www.bjhjyd.gov.cn/

Background:

The BC Mineral Land Tax Act is tax levied on owners of freehold mineral rights. Before 1950, the Crown sometimes granted freehold ownership of minerals with the ownership of the surface land, or by grants of ownership of the minerals only. Such areas comprise a small portion of the province. For the rest of the province, the government rents or leases rights to minerals under tenure legislation such as the Mineral Tenure Act, the Coal Act or the Petroleum and Natural Gas Act. The tax was proposed by the Left because they believed the resource in BC belongs to all British Columbians. Mining comanies have to pay taxes to return the province. High mineral tax was strongly opposed by both mining companies and the Right. They claimed that high resource tax will reduce competitiveness and this will decrease employment rate. The Mineral Land Tax is assessed annually at $1.25 to $4.94 per hectare, depending on the amount of land to which the owner has freehold mineral rights and whether minerals are being produced from the land.

Goal:

The Mineral Land Tax Act is tax levied on the small number of land owners in the province granted mineral rights under land before 1950. The purpose of Mineral Land Tax is to provide a return to the province from commercial use and depletion of the province’s coal and mineral resources.

Coverage:

Mineral Land Tax rates are based on the size of the mineral land and whether or not the land is in production. There are only two types of exemptions:

1. Charitable Exemptions:

Registered charitable organizations are exempt from the payment of Mineral Land Tax. Please contact us with your charitable registration number to claim this exemption.

2. Agricultural Exemptions

The Mineral Land Tax Act provides for a classification of “agricultural mineral land”, where the land is used primarily for agricultural purposes. Land classified as agricultural mineral land must be assessed under the Act, but no tax is payable. Please see the Application for the Classification of Agricultural Mineral Land for more information.

Tax Rate and Tax Revenue:

As we can see from the table above, Mineral Land Tax rates are based on the size of the mineral land and whether or not the land is in production. Not later than July 2 in every year, owners of mineral lands must pay the tax. If Mineral Land Tax remains unpaid for two consecutive years, the mineral rights become subject to forfeiture, which means they can be taken away by the government. A person can choose to surrender all or part of an interest in mineral land to the government at any time.

Refunds are available in order to reward mining exploration. Normally, 20% of exploration expenses fund by the government and the revenue raised from Mineral Land Tax is strictly used for environmental expenditures. The corporation or partnership must incur qualified mining exploration expenses before January 1, 2017 for determining the existence, location, extent or quality of a mineral resource in B.C.

Cost-Effectiveness and Distributional Impacts:

About the cost-effectiveness of the policy, I believe this policy is necessary. First of all, as the Mineral Land Tax is implemented, both the consumers and producers are hurt and deadweight loss was formed. However, as the government rewards mining exploration by refunding 20% of the exploration expenses, the deadweight loss decreases. Second, except for Mineral Land Tax, there is also a Mineral Tax. Mineral Tax is levied on operators of mines (including placer mines) and quarries. As we can see, both taxes are imposed on mining companies and they are somehow overlapping. The goal of Mineral Land Tax is not increasing revenue, but saving resource, protecting environment and reducing pollution. The Mineral Land Tax alone is not high, but together with Mineral Tax, mining companies have to be careful when exploiting resource since they have to pay for both the land and their production. It is obvious that these two policies can save resource and reduce waste. I believe the total policy cost is acceptable because saving resource and reducing waste are more important. With the policy, a new optimal exploiting level is formed and the market will move to the optimal level by itself.

Is Mineral Land Tax an important tax for mining companies in BC? I’m afraid it is not. For example, in 2011, the total Mineral Land Tax in BC is only $601,000 while Mineral Tax is $363,911,000. In 2012, the total Mineral Land Tax in BC is $594,000 while Mineral Tax is $357,706,000. Mineral Land Tax is only considered as land rental cost. It is not a major expense. So, unlike Mineral Tax, it won’t affect mining companies decisions. However, I think it will be a good idea to eliminate Mineral Land Tax to reduce administritive costs and reduce burden to the mineral extraction companies. I believe a tax on mineral company is necessary and these two taxes can merge into a new mineral tax.

As the government rewards mining exploration by refunding 20% of the exploration expenses, how will the policy affect people? Well, it is obvious that producers can reduce some of the cost and consumers can also pay less. However, they still need to pay more because of the tax. After the tax, the price will go up and demand will decrease. Both producers and consumers will pay for the tax. The amount of paying based on the slope of supply and demand curve. However, as the government refund the tax, both individuals and business can get some benefit.

How can mineral tax affect the market? I can give an example. In 2011, Australia announced that a 30% Mineral Tax was imposed for mining companies with annual profit of $75 million. This is a compromise because the government had planned to impose a 40% Mineral Tax. More Mineral Tax is a new international trend. However, it will hurt both the producers and consumers. Chinese buyers decided to buy more ore from Africa instead of Australia. Of course, the ore price in Africa will also increase because of the increasing demand. Australian mining companies claim that the tax imposed by the government makes them earn less and the policy will destroy Australian mining industry.

Conclusion:

So, in total, the mineral tax policy in BC can hurt business and consumers at the same time, but it is friendly to environment. I do think a refundable mineral tax is necessary since it can save resource and reduce the deadweight loss at the same time. However, since Mineral Land Tax is not important enough to affect decisions of mining campanies, my suggestion is that we can cancel Mineral Land Tax and impose a little bit more on Mineral Tax. It is more cost-effective and time-saving effort.

Reference:

1. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Land_Tax/mineral_land_tax.htm
2. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Tax/mineral_tax.htm
3. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Tax/minrev_collected.pdf
4. http://www.bbc.co.uk/news/business-17441170
5. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Land_Tax/MLT_Act.pdf