China Imposes an Extra 10% Tax on Imported Luxury Cars

Automotive - Pavan Pandey - Dec 02,2016

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china imposes an extra 10 percent tax on imported luxury cars

The Communist government has imposed a 10 percent import tax in effect from Thursday, on super-luxury cars valued 1.3 million yuan or (approx. $190,000) above.

The Finance Ministry of China stated, this step is targeted at encouraging rational consumption and controlling the usage of energy and emissions as well as promote energy-efficient cars.

 The new tax rate will potentially affect valuing for a top series of car models from carmakers like Daimler’s Mercedes-Benz, Audi AG and BMW; also including super high-end brands like Rolls-Royce, Aston Martin and Ferrari. Despite the campaign, these carmakers have seen a huge growth in China, for e.g., in the second quarter of this year Ferrari sales have surged 26 percent in the Chinese market.

Chinese leaders are endeavoring to develop domestic consumption to decrease belief in trade and investment, but extravagant spending by the elite is diplomatically risky at a time of slackening economic growth. The government run by president, Xi Jinping, has launched an enormous campaign against corruption by targeting the bluff shows of wealth and encouraging a moderate way of living among the nation’s political and economic elites.

 A Beijing-based BMW spokesman stated during a media briefing, “The majority of our business will not be impacted. But because this just announced yesterday, we are still evaluating to see what impact we might see on our business.” He further added that, only a minor portion of the vehicles BMW trades in China were valued at 1.3 million yuan.

The latest import tax originates at a time when the whole auto sales growth is slackening. It wasn't clear whether the newest 10% tax, which explicitly aims imports, might run afoul of Beijing's WTO (World Trade Organization) assurances to treat overseas and domestic goods similarly. For the consumers of super luxury cars, taxes will have to be paid based on the size of engine that can add up to 40 percent of the purchase value.