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Tax changes in China for Environmental protection

Written by: Staff

BEIJING, Mar 22: A range of planned Chinese consumption tax changes aimed partly at environmental protection will raise levies on fuel-guzzling cars while slapping new charges on oil products and even disposable chopsticks.

The changes, to take effect on April 1, will be the biggest adjustments to consumption taxes in 12 years, in line with China's newly stressed national goals of slashing energy consumption and stemming environmental degradation.

The move was aimed at ''promoting environmental protection and economising on resources while better guiding the production and consumption of certain products,'' the Ministry of Finance said on its Web site (www.mof.gov.cn).

The adjustments did not reflect any major shift in China's tax policy but did represent the government's first major step in the implementation of its energy conservation policy, HSBC economist Qu Hongbin wrote in a research note.

Higher consumption taxes on luxury goods also bode well for Hong Kong, because it would become a more attractive shopping hub for middle-class mainland consumers, he said.

Among the most significant changes will be adjustments to car taxes, with levies poised to rise as high as 20 per cent for highly polluting vehicles with larger engines, the ministry said.

Charges would be cut or remain unchanged for cars with smaller engines while levies on low-powered motorcycles would be reduced to encourage their use, the ministry said.

Hybrid cars and other environmentally friendly vehicles would enjoy a discount, it said, without giving specific details.


China would also broaden the scope of oil products subject to consumption levies to include fuel oil, jet fuel and naphtha and lubricants, as the government leans more on pricing mechanisms to curb the country's rampant use of energy.

Plans to impose a 5 per cent tax on both disposable wooden chopsticks and wooden floor panels would help curb the plundering of timber resources and efforts to protect the environment.

The production of disposable chopsticks used up 1.3 million cubic metres of timber each year, depleting the country's forests, the ministry said.

Adjustments were also made to apply new consumption taxes on golf balls and equipment, yachts and luxury watches and to scrap charges on skin care and shampoo products, which were once seen as the privilege of the wealthy but have become commonplace.

China's most common hard alcohol, known as baijiu, would be taxed at a flat level of 20 per cent for the first time, it said.

The Finance Ministry did not say how the move would affect hinese efforts to spur domestic consumption as a bigger driver of growth alongside exports and investment.

But it did say that the changes would better guide the production and consumption of related products.

Plans to slash charges on motorcycles with small engines and to leave those of higher-powered ones unchanged were partly aimed at relieving the tax burden among workers and peasants in rural areas, the ministry said.

The adjustments are in keeping with the spirit of the ruling Communist Party's 2006-2010 Five-Year plan which aims to move the nation to a more sustainable growth model with less environmental degradation and greater social equity.


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