Dec. 19 (Bloomberg) -- China may impose a tax of as much as 10 percent on crude oil output and introduce a fuel levy at an ``appropriate'' time to raise revenue for provinces and help fund roads, Vice Finance Minister Zhu Zhigang said.

The ministry would collect a 5 percent tax on crude oil and submitted a proposal to set the levy at twice that rate, Zhu said in a statement on the Beijing-based ministry's Web site. The finance ministry will collect taxes on other resources such as geothermal heat and mineral water, Zhu said.

The world's fastest-growing major economy plans to base the resources tax on the price of the commodity, rather than link it to the volume extracted. The tax would be local and contribute to revenue in the provinces where the oil is drilled.

``The tax should not be a big surprise to the market as there have been rumors circulating for a long time, given the surprisingly high oil price,'' said Gordon Kwan, head of China energy research at CLSA Ltd. in Hong Kong. ``China's tax rate is still far lower than those in other areas such as the North Sea, Venezuela, Indonesia and Nigeria, so I don't think this will scare away too many foreigners from drilling for oil in China.''

Chinese oil producers currently pay a tax on any revenue above $40 a barrel for oil they sell as a so-called windfall tax, introduced in March 2006. Payments will reach 60 billion yuan ($8.1 billion) this year, the government said Dec. 6.

China will introduce retail fuel taxes as part of efforts to change the country's system of road tolls and maintenance charges, Zhu said. The time for introducing a fuel tax ``has arrived,'' he said, without giving further details.

Authorities in Beijing first proposed a fuel tax in April 1999. The plan has been delayed as international crude oil prices surged and contributed to rising inflation. China's consumer prices are accelerating at the fastest pace in 11 years.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net; Ying Lou in Hong Kong at ylou1@bloomberg.net.

Last Updated: December 18, 2007 21:56 EST