An unexpected hike in oil prices has forced China's tax authorities to shift their attention from a controversial fuel tax towards a fee-cutting campaign in rural areas, official sources said.

"The focus of our plan for this year has been shifted to a fee- for-tax drive in the countryside," said Cheng Faguang, vice director of the State Administration of Taxation (SAT).

An increase in gasoline prices, mainly due to an abrupt shortfall in oil supply that began during the fourth quarter last year, has stymied efforts to eliminate the long-anticipated fuel tax in the near term, the official said.

As a result, the government is zeroing in on the rampant illegitimate fees imposed on Chinese farmers, another major target in its fee-elimination campaign.

A pilot rural program will be implemented this year in selected provinces and cities before the reform is spread nationwide, he said.

Under the trial program, unreasonable fees collected by township governments, including those collected in the name of education, road construction, militia training, family planning and allowances, will be merged into a 5 percent agricultural tax, the official said.

The 5 percent tax compares to a 15.5 percent nominal rate in existing agricultural taxes, which have virtually been levied at merely 2.5 percent thanks to China's pro-agriculture policy, sector insiders said.

The refocused tax campaign coincides the perceived need to alleviate farmers' burdens, which could therefore boost spending in rural areas and assist the country's economic growth goals, analysts said.

Heavy fees that have been out of control in the countryside have been eroding the buying power of farmers, making the rural market a backwater in the battle to kickstart domestic demand.

According to a survey conducted in 1997 among 5,000 of rural households in 12 provinces across the country, a farmer paid 149 yuan in various fees each year, out of a total per capita burden of 195 yuan.

However, the SAT official said that the plan has encountered discontent from local governments, who fear that the 5 percent agricultural tax rate will not be enough to fund local budgets. " They are worried that the new tax rate is too low to raise adequate funds," he added.

The agricultural tax has been a major source of local revenues since the government revamped its tax system in 1994. But local governments have complained that the pro-agricultural policy -- largely represented by the 2.5 percent virtual tax burden -- has narrowed sources of funds needed to develop local economies. This has given rise to various fees, tax insiders said.

The agricultural specialty tax, levied on the purchasers of some items such aquatic products, will be shifted onto raisers or producers, insiders said.

"But that will not harm the producers since the lighter tax will bring more purchasers and therefore push up the prices for agricultural specialties," the SAT official said.