Ministry of Finance denies rumor of luxury car tax in China

Recently, the Chinese media has been ablaze with rumors of an impending tax aimed at luxury vehicles. In a report appearing on AAStocks.com earlier this week, a representative from the Ministry of Finance's Taxation Reform Department officially denied the rumors, saying there was no 'luxury automobile tax' in the works and that the country's taxation policies are not designed to implement such tax policies. However, the representative also added that there has been no final decision on whether or not to modify current taxes targeting automobile purchases.

According to State Council Counselor Liu Huan, there is already an abundance of taxes citizens may have to face when purchasing a new automobile, such as import tax, sales tax and tire tax. "The [government] will be cautious about what purchasing taxes to implement," Mr. Liu stated. "Purchasing taxes are a double-edged sword, [as] high taxes have the potential to harm the market," he added.

In an announcement made on the state of economic reform work in 2013, the National Development and Reform Commission stated that it would increase tax levels for those automobiles which "cause high pollution or consume excessive resources".

In his analysis on the subject, James Lee, regional director for the Institute of Chartered Accountants in England and Wales' Greater China branch, points out that if such a tax was to be implemented, its goal would be to restrict the amount of energy resources high-level vehicles use. However, Jia Xinguang, a senior researcher with the China Automotive Technology and Research Center's Automotive Industry Development Institute, points out that such a policy's effect on the automobile market as a whole would be limited due to the relatively low number of luxury car sales in China.