Chinese private refiner Bohui ceased operation of its aromatic extraction and treated distillate aromatic extract units after local tax authorities slapped it with a bill for unpaid consumption tax. The company said it would try everything it could to start the units up again and stay in business but in the meantime is laying off workers and cutting wages.
Until June 30, 2023, there was no such consumption tax on heavy aromatics. But the national tax office and finance ministry jointly issued an announcement stipulating that suppliers must pay tax for mixed and heavy aromatics.
Bohui retrofitted its aromatic extraction facility right after the announcement, changing its product from heavy aromatics to heavy aromatic derivatives. Two months later, the company submitted the relevant documentation informing the authorities of the change and, according to the company, received no objections from tax officials.
But in March 2024, Bohui announced that it received a letter from the local tax office asking it to pay the consumption tax for its aromatic derivatives, which it regarded as heavy aromatics. At CNY2,105 ($290) per metric ton, the company would have to pay about CNY500 million ($68.8 million) in total. This would result in a 284% drop in profits year-on-year in the first quarter of 2024.
Bohui has yet to pay the tax. The company said it is in negotiations with the tax office, hoping to reach a settlement as soon as possible.
The Ningbo-based refiner mainly supplies heavy aromatic derivatives, TDAE and a small amount of API Group II base oils. TDAE is a rubber oil that can be used to produce industrial lubricants.