China to Raise Consumption Tax on Big Cars

China will adjust consumption tax on vehicles as of September 1 this year to curb high-emission cars and promote small-sized ones, according to a circular jointly issued by the Ministry of Finance and the State Administration of Taxation Wednesday.

The country will raise the consumption tax on high-emission passenger vehicles and cut the consumption tax on low-emission passenger vehicles, in an effort to save energy and fight pollution.

Detailedly, the tax on big cars with a 4-liter engine or above will rise to 40 percent from 20 percent, ones with engine displacement between 3.0 liters and 4.0 liters will increase to 25 percent from current 15 percent.

The consumption tax rate on passenger vehicles with an engine size of 1 liter or lower will fall to 1 percent from current 3 percent, according to the circular.

The State Council, China's cabinet, agreed on July 23 this year in principle to raise the consumption tax on cars with large engines to help save energy.

The cabinet said that energy-efficient automobiles would be given preferential tax treatment, and it would look to make sure that polluting old automobiles are taken off the streets and that public transportation will be ramped up.

China Automobile Trading Co Ltd figures show from January to May, 26,992 large cars were imported. This comprised a 41.38 percent share of total car imports. Sport utility vehicles (SUV) imports in the first five month surged 91.3 percent over same period last year.

According to an insider, the tax rise would have the biggest impact on auto producers from the European Union and Japan as luxury cars mainly came from those two regions.

As the auto boom drives China into the modern era, it also worsens air pollution, traffic jams and the energy crunch. According to a report issued by the World Bank, air pollution is costing China 3.8 percent of its gross domestic product.

Estimates show that in Beijing's air pollution, 74 percent of hydrocarbons, 63 percent of nitrous oxide, and 50 percent of nitrogen oxides comes from motor vehicles.

Source: CRIEnglish