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China hikes luxury car import tax

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BEIJING: China has imposed an extra 10% tax on luxury cars costing over 1.3 million yuan ($190,000) such as Lamborghinis and Ferraris, the government said, the latest step in a wide crackdown on conspicuous luxury consumption. This is the President Xi Jinping led Communist Party’s effort to rein in ostentatious spending.

The new tax took effect Thursday and was intended to “guide rational consumption” and promote energy-efficient vehicles, the finance ministry said in a statement late Wednesday.

“The tax increase is a display of the government’s attitude of advocating frugality,” said Cui Dongshu, secretary-general of the Passenger Car Association, according to Bloomberg News.

According to customs statistics, the duties and increased competition from cheaper domestic marques have driven overall car imports down two years in a row, with 850,000 vehicles imported in the first 10 months of the year, down 6.4% from 2015. China is one of the world’s largest auto market, and the luxury automakers from Germany and Italy have seen a massive growth here. Ferrari has seen 26% surge in its second-quarter sales this year, with 160 units delivered.

On luxury car imports, China currently has MFN duty of 25% + 17% sales tax + 12% Consumption tax and 30% Parcel Tax – which totals to 84%, plus, the new 10% will make the final count to 94%. This number is still a lot less than the Indian import taxes which totals to 163%.

Other countries with high luxury car import taxes are Pakistan with 170%, Bermuda – 150% and Egypt with 135%.

With inputs from AFP

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