Serving the World's Largest Emerging Automobile Market
Home > Laws and Regulations > China considers environmental tax on automobiles

China considers environmental tax on automobiles

“The Ministry of Finance has begun an investigation into the feasibility of levying an environmental tax on automobiles,” said Zhang Yanyou, deputy director of the Beijing economic planning agency, at a session of the Beijing Municipal People’s Congress, according to local news media reports in late January.

As explained by Zhang, the policy is only being researched, and there’s uncertainty as to if, when and how it will be carried out in the future.

So far, government officials in different departments have varying ideas about the new policy.

The environmental tax, according to Zhang, is similar to the purchase tax that will be collected based on the degree of pollution emitted by automobiles. Certainly owners of large-displacement vehicles will have to pay more than others.  

But Ren Hongyan, an official from the Ministry of Environmental Protection said that the new tax law will be more or less similar to the fuel tax. Those vehicles that run a greater mileage should cost more.

A recent survey shows that the cost increase derived from the proposed environmental tax would negatively impact the auto industry, affecting nearly 50 percent of potential consumers who would likely put on hold their plans to buy new cars.

Some dealers also said that the proposed environmental tax would greatly suppress consumer enthusiasm and impact auto consumption nationwide. The key solution to the problem is to set up a reasonable duty that will help guide consumption so as to foster a healthy development of China’s auto market.

With more and more automobiles being purchased by individuals and ordinary families in China, vehicles are imposing an increasing pressure on the environment in the forms of air pollution and greenhouse gas emissions that aggravate global warming.

Various environmental protection measures related to vehicles have been employed in past years, including regulations on emission standards and projects carried out to solve traffic congestion in large cities. Now the government thinks it is the time to consider an environmental tax to enhance its efforts in environment protection.

A numbers of industry analysts believe that despite the possible disadvantages such as those mentioned above, the environmental tax will help achieve China’s energy saving target in the long run, which is in line with vital public interests. But this is a complicated matter which requires considerable planning to ensure a reasonable duty rate for collection.

“It is true that the fuel consumption varies greatly with different cars of the same engine displacement. The tail emission will be tremendously different between a new car and a used car close to the age of retirement. And in certain cases fuels of a different label may also result in different amounts of pollution,” said some experienced car owners.

Already there have been several taxes affecting automobile production and consumption, including the consumption tax, purchase tax, fuel tax and value-added taxes. Some experts said an environmental tax should arise only after careful consideration leading to a well-thought out decision. In the meantime, further adjustments of the fuel tax rate would serve as a good alternative in strengthening environmental protection in the auto industry.

According to Zhang Xiaoyu, executive vice president of China Machinery Industry Federation, the introduction of the environmental tax is the trend of auto development in China, which should be supported by both the manufacturers and consumers. But the imposition of a new tax must be very prudent.

“We have to reform the existing taxes and fees to avoid double taxation and heavy tax burden to consumers,” echoed Su Hui, head of the preparatory group for used car automotive market in Beijing under China Automobile Dealers Association.

Leave a Reply