Consumption tax to be levied on private jets, yachts

China Tax Service
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ATAHK reads from Xinhua News that China's consumers of luxury goods will soon be faced with a consumption tax, as announced by a high-ranking official last month. The move is part of plans to level some of the income equality issues in China. For details, please refer to the following news from Xinhua News on September 4th:

Soon that buying that luxurious private jet or yacht will come at a heftier price.

According to a senior official from Finance Ministry’s Financial Science Institute, these along with environment-damaging items such as batteries will come under a levy tax under a taxation reform plan. In addition the taxes on other goods, such as finished oil, will be levied on the sales price rather than the production process.

"Taxes on luxury goods like private jets and yachts will help expand the fiscal revenue and at the same time level some of the income equality issues," Yang Zhiyong, research fellow with National Academy Of Economic Strategy,CASS, said.

According to a survey conducted by Peking University, about a third of China’s wealth is held by 1% of citizens, with disparity greatest between affluent east coast and poorer interior.

The report concludes that while the country is getting richer as a whole – the average net worth of a Chinese household rose only 17% to $71,000 in 2012 from 2010.

Previously, China’s biggest wealth discrepancies largely existed between rural and urban areas, but major nationwide urbanization campaigns narrowed those gaps.

The greatest economic divisions are now between the eastern coastal areas and the relatively impoverished interiors, and amongst different areas of individual cities and provinces.

Inequality is a serious and growing problem in China, and authorities are serious about tacking the issue.

"It is still hard to say how much the consumption tax will have an impact on the sales of luxury goods like private jets and yachts, we can’t depend on this means alone to address the income gap issue. The definition of luxury goods should match the economic development," Yang said.

So far there has been no specific timetable for the reform plan, or to what extent the consumption tax will be levied.

Though some industry experts and the wealthy have voiced opposition, it looks like it is a matter of time before buying that dream jet or boat will get even more expensive.

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