Taxes on big cars lifted in green drive - ResearchInChina

Date:2008-08-14liaoyan  Text Size:

CHINA is raising its sales tax on big cars to as high as 40 percent, and drastically cutting taxes on small cars, in its latest attempt to cut energy use and reduce emissions.

Starting from September 1, the sales tax for passenger cars with engine capacities between 3 liters and 4 liters will rise to 25 percent from 15 percent, with the rate for cars powered by engines of more than 4 liters doubling to 40 percent, the Ministry of Finance said yesterday.

The rates for cars with engines that are 1 liter or less would fall from 3 percent to 1 percent, a ministry statement said. The rates for vehicles powered by other engine capacities will remain unchanged, ranging from 3 percent to 12 percent.

"The adjustment of the sales tax is aimed at restraining the production and purchase of big-engined vehicles and spurring the demand for small cars," said Lang Xuehong, director of the automotive division of Sinotrust Consulting.

"It will help lower fuel consumption and reduce air pollution, contributing to the sustained growth of the auto industry," Lang said.

"The policy will have a positive impact on boosting the sales of our small vehicles," said Zhang Jiagan, assistant chairman at Zhejiang Geely Holding Group Co Ltd, which just launched the 1-liter Free Cruiser sedan.

The small-car sector has suffered in China as big cars become status symbols in a more affluent society.

Sales of cars with engines of less than 1 liter fell 31 percent to 251,700 last year, according to the China Association of Auto Manufacturers.

The market share of vehicles with engine capacities below 1 liter dropped from 6.5 percent to 3.1 percent last year compared with a 15-percentage-point increase for the economy-car sector powered by engines between 1 liter and 1.5 liters.

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