Govern­ment ‘mulls’ con­sumer tax re­form


China is con­sid­er­ing a con­sumer tax over­haul, ac­cord­ing to sources, the lat­est in­di­ca­tion re­forms are be­ing ac­cel­er­ated to help speed the shift to­ward a more con­sump­tionecon­omy.

The Min­istry of Fi­nance has sub­mit­ted the tax over­haul pro­posal to the State Coun­cil, said the sources.

The plan may change af­ter it’s de­bated by min­istries that are part of the State Coun­cil, China’s Cab­i­net, one per­son said. Fi­nance of­fi­cials broadly sup­port tax cuts on cheaper cos­met­ics and toi­letries, and talks also in­clude rais­ing al­co­hol and to­bacco taxes, one per­son said.

The pro­posal would be an­other step to­ward a broader tax code over­haul fol­low­ing re­forms of the value-added tax in May that will ease cor­po­rate pay­ments.

Changes are needed to keep up with shift­ing con­sump­tion trends as prod­ucts once seen as lux­ury goods are now ev­ery day items for China’s rapidly ex­pand­ing mid­dle class.

The over­haul may have wide-rang­ing im­pli­ca­tions, from spurring bud­get-con­scious smok­ers to kick the habit or mak­ing it less de­sir­able to take a trip to South Korea to load up on beauty prod­ucts.

It also could tip the bal­ance of govern­ment fi­nances: Whether to give a greater share of con­sumer tax rev­enue to pro­vin­cial gov­ern­ments in­stead of the cen­tral govern­ment is also be­ing de­bated at the State Coun­cil, one of the peo­ple said.

Such tax re­form would be “a step to­ward a trans­par­ent tax sys­tem” that also aims to en­cour­age con­sump­tion and health­ier spend­ing habits, ac­cord­ing to Ding Shuang, the head of Greater China eco­nomic re­search at Stan­dard Char­tered Plc in Hong Kong.

An­other mea­sure be­ing dis­cussed is whether to levy taxes on en­ergy-re­lated prod­ucts such as char­coal used for heat­ing, ac­cord­ing to one of the peo­ple.

The Min­istry of Fi­nance didn’t im­me­di­ately re­spond to a faxed re­quest for com­ment on Tues­day.

The cen­tral govern­ment man­dates and col­lects taxes na­tion­wide on con­sumer goods, which brought in rev­enue of 1.1 tril­lion yuan ($165 bil­lion) last year, Fi­nance Min­istry data show.

Most con­sumer goods are ex­empt from the tax, which ap­plies to prod­ucts in­clud­ing cos­met­ics, al­co­hol, to­bacco, jew­elry and fire­works sold by re­tail­ers and whole­salers.

The State Coun­cil weighs such pro­pos­als and seeks in­put from other min­istries be­fore de­cid­ing whether to pro­ceed with a plan or send it back for mod­i­fi­ca­tion.

Un­der the new value-added tax sys­tem un­veiled ear­lier this year, taxes in the con­struc­tion, prop­erty, fi­nance and con­sumer ser­vice sec­tors will­nowbe ap­plied to the value added— such as the dif­fer­ence be­tween whole­sale and fi­nal sales price for a re­tailer — in­stead of a rev­enue-based levy.

rev­enue from taxes na­tion­wide on con­sumer goods last year


Cos­met­ics on sale at a de­part­ment store in Langxi county, An­hui prov­ince, at­tract con­sumers.

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