Sign in Subscribe
Economic conditions

China Considers Raising Consumption Tax on Luxury Items to Fight Poverty

Strategic Insights

— 1 min read

Financial experts have welcomed the suggestion from a top tax official that China may raise the consumption tax on luxury items to boost its role in fighting poverty. According to Wang Li, deputy head of the State Administration of Taxation, the country is considering further increasing its tax rate on high-end luxury goods to let the consumption tax system play a bigger role in poverty alleviation. This move comes after China made sweeping changes to its consumption tax regime in April, introducing a tax on disposable wooden chopsticks and luxury items such as yachts and golf clubs.

Key Takeaways:

  • The State Administration of Taxation is considering increasing the consumption tax rate on some high-end luxury goods to boost its role in fighting poverty.
  • China collected 163.4 billion yuan (US$20.8 billion) in consumption tax last year, and 142.8 billion yuan in the first three quarters of this year, accounting for 5% of the total tax revenue.
  • A recent survey showed that 40% of those polled think that consumption tax should be imposed on more luxury goods and services such as jewelry and VIP club memberships.
  • Luxury items are not easily defined, and some items once considered luxuries have become common goods and are no longer regarded as luxury items.
  • The tax regime should be adjusted accordingly from time to time to reflect changes in consumer behavior and preferences.
  • Wang Li, deputy head of the State Administration of Taxation, has stated that China will continue to improve its consumption tax system to let it play a bigger role in poverty alleviation.
  • Wang did not reveal specifics on when the adjustment would take place, but noted that the tax code for luxury items will be adjusted from time to time.

Statistics:

  • 163.4 billion yuan (US$20.8 billion) collected in consumption tax last year
  • 142.8 billion yuan collected in consumption tax in the first three quarters of this year
  • 5% of total tax revenue accounted for by consumption tax in the first three quarters of this year
  • 40% of those polled think that consumption tax should be imposed on more luxury goods and services such as jewelry and VIP club memberships

Sources:

  • Asia Pulse, November 16
  • China Business News, cited by Shanghai-based China Business News
  • XIC, 16-11 1608

Read more