Consumption tax may be put on more luxury items

Updated: 2006-11-15 13:31

The Chinese government is considering expanding the list of luxury items subject to a special "consumption tax", says Wang Li, deputy director of the State Administration of Taxation (SAT).

Wang told the first annual forum on China's fiscal reform here that tax reform should progress with personal income tax, property tax and consumption tax to be adjusted tp strengthen the role of taxation in reducing poverty.

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He did not disclose the exact timetable for the adjustment of consumption tax on more luxury items.

A recent survey by the Horizon Research Consultancy Group showed that 40 percent of Chinese believe consumption taxes should be imposed on more luxury items such as jewelry and VIP club memberships.

Professor Tang Gongliang, of China's elite Central University of Finance and Economics, said periodic adjustments of the list of luxury items subject to consumption tax were necessary to keep it up to date.

"With people's living standards increasing quickly, some items which were once luxuries have become common and are no longer regarded as luxury items," he said.

The government imposed a consumption tax on disposable wooden chopsticks, wooden floor panels, yachts, luxury watches and oil based products on April 1.

Tang said consumption tax played a big role in the regulation of income distribution and the adjustment of consumption trends.

"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.

Official statistics show consumption tax revenue amounted to 142.85 billion yuan (17.86 billion U.S. dollars), five percent of the total tax revenue.

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