Official hints at luxury tax hike

"We are considering further increasing our tax rate on some high-end luxury goods," Wang Li, deputy head of State Administration of Taxation, told a fiscal and tax policy forum on Tuesday.

"China will continue to improve its consumption tax system to let it play a bigger role in poverty alleviation," the tax official told the forum.

"In that process, we are striving to improve our personal income, property tax and consumption tax regime," Wang was quoted as saying by the Shanghai-based China Business News.

But Wang did not reveal specifics on when the adjustment would take place.

"It should be more appropriate to say that we are going to adjust the tax codes for luxury items, instead of saying we are simply to raise tax for luxury goods," a senior official from Law and Regulation Department at the State Administration said yesterday.

"The tax code for the luxury goods will be adjusted from time to time," said the official, who requested anonymity and declined to elaborate.

China made sweeping changes to its consumption tax regime in April, slapping a consumption tax on disposable wooden chopsticks and luxury items such as yachts and golf clubs.

This was the largest adjustment to the consumption tax regime since its introduction in 1994.

Increasing the consumption tax rate on some luxury goods is well warranted," said Yi Xianrong, a researcher at the Chinese Academy of Social Sciences.

A recent survey conducted by Horizon Research Consulting, a Beijing-based market research firm, showed that 40 per cent of those polled think that consumption tax should be imposed on more luxury goods and services such as jewellery and VIP club memberships.

"Luxury items are not easily defined. For instance, some luxury electronic products such as sound equipment are not taxed as luxury items because they are so quickly updated and may become common goods very quickly," said Tang Gongliang, a fiscal policy expert at the Central University of Finance and Economics.

Some items once considered luxuries have become common and are no longer regarded as luxury items any more," the expert said.

"So the tax regime should be adjusted accordingly from time to time," he said.

The nation collected a total of 163.4 billion yuan (US$20.7 billion) in consumption tax last year, according to figures from the State Administration of Taxation.

Consumption tax revenue totalled 142.8 billion yuan (US$18.1 billion) in the first three quarters of this year, about 87 per cent of last year's total.

However, it only accounted for 5 per cent of the total tax revenue at the same time, figures showed