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China raises taxes on big cars to curb emissions

(chinadaily.com.cn)
Updated: 2008-08-13 19:19

The Chinese government is raising sales tax on big cars, while reducing taxation on small ones, in an effort to curb fuel consumption and control emissions that are destroying the air quality in most Chinese cities.

A man looks at a Stretch Hummer limousine parked in the central business district of Beijing July 11, 2008. [Agencies]

A decree by the Ministry of Finance and the State Administration of Taxation, signed on Wednesday, ruled that tax on passenger vehicles with engines bigger than 4 liters will be hiked to 40 per cent, from a previous mark of 20 percent. Also, those buying cars with engines between 3 liters to 4 liters will have to pay a 25 percent tax, in stead of 15 per cent. The decree comes into effect on September 1.

To encourage purchases of small vehicles, the decree said that buyers who purchase cars with engine sizes at or smaller than 1 liter will pay only 1 percent tax, instead of the previous 3 percent.

The two government departments said in a statement posted on the website of the Ministry of Finance that the tax policy revision was made to assist China’s one-year-long endeavor to curb emissions and conserve energy.

File photo of exhaust pipes of a car.

The re-adjustment aims to restrain production and consumption of oil guzzlers in China, while encouraging sales of small vehicles, which will be in the interest of national oil conservation, and anti-pollution drive, it said.

Car sales in China have grown by more than 20 percent per year for the last three years, but the pace slowed to 17.07 percent in the first half of this year.

Related readings:  Beijing's car controls cut emissions by 20 percent  Small car sales can rise with fuel price

Data from the China Association of Automobile Manufacturers shows sedan sales rose 6.79 percent from a year earlier to 488,200 units in July. From January to July of this year, car sales, including multipurpose vehicles and sport utility vehicles, rose 15.8 percent from a year earlier to 4.1 million units.

The car market was hit by additional bad news in late June, when Beijing raised fuel prices by nearly 20 percent, the first rise in seven months and the steepest one-off hike ever.

Experts estimate that tax hikes and fuel price hikes would further slow vehicle purchases in China and bolster sales of fuel-efficient cars.