BEIJING – China will levy purchase tax on 1.6L and below passenger vehicles at the rate of 7.5 percent in 2017, according to a statement posted by the Ministry of Finance on its website on December 15, just as CBU/CAR predicted over a month ago.
The new rate will be valid for a year from January 1-December 31, 2017 and return to the normal 10 percent starting from January 1, 2018.
The tax rate had been halved from the normal 10 percent since October 1, 2015 in an effort to drive vehicle sales and promote energy saving. That scheme was due to expire on December 31, 2016. The tax break has played a key role in driving up auto sales in 2016, with sales in the first 11 months up more than 14 percent to nearly 25 million units, already surpassing total sales in 2015. Sales of 1.6L and below passenger vehicles account for well over 70 percent of the passenger vehicle sales total.
“CBU/CAR believes what may likely happen is that the policy will continue for another year, but at a lesser ‘discount’ – 7.5 percent, or a quarter off the normal 10 percent rate instead of half off,” wrote Lei Xing, chief editor of CBU/CAR, in the Editor’s Note titled Purchase tax policy likely to continue in 2017, but with a twist in Vol. 11, No. 12.
China is on its way to selling nearly 28 million vehicles in 2016 and close to 30 million this year. With the tax break gone in 2018, however, zero of even negative growth maybe imminent.