Economy

Markets

Industries

Insights

Reports

Events

China's comsuption tax to see big adjustment

(CRIENGLISH.com )
Updated: 2006-03-30 17:20

China will adjust its list of taxable items and rates as well as other related consumption tax policies, as of April 1st.

It will be the biggest change to the country's consumption tax system since 1994.

The main adjustments include imposing a consumption tax on disposable wooden chopsticks and on luxury items such as yachts and golf clubs.

Kerosene, fuel oil, naphtha, lubricants and oil based solvents will be added to the list of taxable items, while soaps and shampoos will be removed from the list. Tax rates on Chinese alcohol, automobiles, motorcycles and rubber tires will also see changes.

China first launched its consumption tax system in 1994. This year's adjustment is seen as a way to alter the consumption structure to adapt to the country's changing economic growth model.

1. New Items: Petroleum Products

Kerosene, fuel oil, naphtha, lubricants and solvent oil will be included in consumption tax items of from April 1.

Naphtha, lubricants and solvent oil will be taxed at 0.20 yuan per liter and that aviation kerosene and fuel oil will be taxed at 0.10 yuan per liter.

But the government will collect only 30 per cent of the announced tax on naphtha and solvents to reduce the impact on industry; and not collect the tax on aviation fuel for the time being.

2. New Items: Wooden Products

A 5-per cent consumption tax will be collected on disposable wooden chopsticks and wooden floor panels to discourage their use as they are a waste of timber resources.

3. New Items: Luxury Goods

Luxury items to be taxed include yachts, golf clubs and balls and high-end watches, buyers of yachts, golf balls and golf clubs will face a 10 percent tax, while luxury watches will be taxed at a rate of 20 percent.

4. Adjustment: Automobiles

Under the new rules, cars with engines of between 1 liter and 1.5 liter will have their taxes cut to 3 percent from 5 percent. Cars with engines of smaller than 1 liter, such as the minicars made by Japan's Suzuki Motor Corp., will be maintained at 3 percent.

5. Adjustment: Motorcycles

Taxes for small motorcycles with engines smaller than 0.25 liter will be cut to 3 percent from 10 percent, and taxes for motorcycles with engines over 0.25 liter willbe maintained at 10 percent.

6. Adjustment: Chinese Alcohol

Unify the tax rates collected on different kinds of alcohol, all Chinese alcohols will need to pay a 20 percent consumption tax.

7. Adjustment: Rubber Bias Tires

Taxes on rubber bias tires, used usually by trucks, will be cut to 3 percent from 10 percent, according to the finance ministry's statement. But the meridian tires will remain tax-free.

8. Cancellation: Skin Care Products

The current tax on skin care and hair care products will end on April 1. That tax was imposed in 1994, when such products were still considered luxuries.