China may revise luxury good tariffs
By Feng Jianmin |
August 24, 2011, Wednesday
|
Print Edition
Print Edition
CHINA is considering introducing different tax policies for imported luxury products in a bid to end a lengthy dispute on whether to reduce duties on such goods.
Gong Huiwen, a researcher with the State Administration of Taxation, suggested that duties should be lowered on luxury products that are more commonly used by the public, such as cosmetics and perfumes. But duties on more exclusive items, such as watches and jewelry, should be raised.
"There is currently no specific category for luxury goods when implementing duties, but we should define and classify luxury goods more carefully," Gong said during a Beijing conference on Monday.
His view was echoed by Zhao Ping, an official at the Ministry of Commerce, who advocated a "dynamic classification" of luxury products.
"Living standards are improving in China and what used to be labeled luxury may already be used widely by the public," Zhao said. "The duties for such goods should be reduced to benefit consumers."
She also pointed out that heavy taxes on non-essential luxury products are necessary, and that reducing duties would not lower their prices anyway because of their function of "revealing social status."
Liu Zuo, an official with the tax bureau, said government departments are still studying the issue and a decision on a possible tax change will be released by the end of this year.
But he added that it is "theoretically right" to implement heavier tariffs on luxury products than ordinary ones, and reducing duties on the everyday luxury products would benefit those foreign brands in their competition with domestic players.
The comments were the latest amid disputes between the Ministry of Commerce and the Ministry of Finance on whether duties on imported luxury goods should be reduced.
Officials with the Ministry of Commerce have said at least five times since April that reducing duties on imported luxury goods could benefit consumers and boost domestic consumption.
"China's tax on luxury goods is the highest in the world," the Ministry of Commerce said in an article published on its website in late June. "The tax makes products several times more expensive in the domestic market than overseas. It causes (Chinese) people to spend more in foreign countries."
But the Ministry of Finance, which oversees taxation, said in early July that it would be wrong and unnecessary for China to scrap or reduce the tax, citing the need to reduce the gap between rich and poor.
Liu Shangxi, a senior researcher with the finance ministry, said, "The taxes for luxury goods are imposed on the rich people, and should rather be raised than reduced. Besides, stronger reliance on imported goods may dampen competitiveness of domestic companies."
A survey conducted by the Ministry of Commerce showed that prices of foreign luxury goods sold on the Chinese mainland are, on average, 45 percent higher than in Hong Kong, 51 percent higher than in the United States, and 72 percent higher than in Europe.
According to the World Luxury Association, China is now the second-largest consumer of luxury goods and may eclipse Japan to become No. 1 next year, with forecast sales of US$14.6 billion. At the same time, more than 80 percent of the spending on luxury goods by Chinese consumers last year took place in foreign markets, it said.
Gong Huiwen, a researcher with the State Administration of Taxation, suggested that duties should be lowered on luxury products that are more commonly used by the public, such as cosmetics and perfumes. But duties on more exclusive items, such as watches and jewelry, should be raised.
"There is currently no specific category for luxury goods when implementing duties, but we should define and classify luxury goods more carefully," Gong said during a Beijing conference on Monday.
His view was echoed by Zhao Ping, an official at the Ministry of Commerce, who advocated a "dynamic classification" of luxury products.
"Living standards are improving in China and what used to be labeled luxury may already be used widely by the public," Zhao said. "The duties for such goods should be reduced to benefit consumers."
She also pointed out that heavy taxes on non-essential luxury products are necessary, and that reducing duties would not lower their prices anyway because of their function of "revealing social status."
Liu Zuo, an official with the tax bureau, said government departments are still studying the issue and a decision on a possible tax change will be released by the end of this year.
But he added that it is "theoretically right" to implement heavier tariffs on luxury products than ordinary ones, and reducing duties on the everyday luxury products would benefit those foreign brands in their competition with domestic players.
The comments were the latest amid disputes between the Ministry of Commerce and the Ministry of Finance on whether duties on imported luxury goods should be reduced.
Officials with the Ministry of Commerce have said at least five times since April that reducing duties on imported luxury goods could benefit consumers and boost domestic consumption.
"China's tax on luxury goods is the highest in the world," the Ministry of Commerce said in an article published on its website in late June. "The tax makes products several times more expensive in the domestic market than overseas. It causes (Chinese) people to spend more in foreign countries."
But the Ministry of Finance, which oversees taxation, said in early July that it would be wrong and unnecessary for China to scrap or reduce the tax, citing the need to reduce the gap between rich and poor.
Liu Shangxi, a senior researcher with the finance ministry, said, "The taxes for luxury goods are imposed on the rich people, and should rather be raised than reduced. Besides, stronger reliance on imported goods may dampen competitiveness of domestic companies."
A survey conducted by the Ministry of Commerce showed that prices of foreign luxury goods sold on the Chinese mainland are, on average, 45 percent higher than in Hong Kong, 51 percent higher than in the United States, and 72 percent higher than in Europe.
According to the World Luxury Association, China is now the second-largest consumer of luxury goods and may eclipse Japan to become No. 1 next year, with forecast sales of US$14.6 billion. At the same time, more than 80 percent of the spending on luxury goods by Chinese consumers last year took place in foreign markets, it said.
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