China cuts controversial tax on personal items bought overseas in move to boost consumption
- The tax rate on products including computers, foodstuffs, gold and silverware, furniture and medicines will be lowered to 13 per cent from 15 per cent
- Analysts doubt whether the minor tax break will have a material impact on China’s sluggish consumer confidence
China has cut a controversial tax on personal items bought overseas, ranging from iPads to books, in an effort to boost consumer confidence.
The government will trim the “tax on baggage and articles accompanying incoming passengers and personal postal articles”, a three-in-one tax consisting of value-added tax, consumption tax and import duties on Tuesday, according to an online notice posted by the Ministry of Finance on Monday.
The tax rate on products including computers, foodstuffs, gold and silverware, furniture and medicines will be lowered to 13 per cent from 15 per cent. The rate for commodities including textiles, electric appliances and bicycles will be cut to 20 per cent from 25 per cent, according to the statement.
The tax rate for wine, cigarettes, jewellery, golf equipment, luxury watches and high-grade cosmetics will be kept at 50 per cent.
This is the second round of tax cuts on consumer products bought overseas in six months, after Beijing initially lowered the rate on November 1, 2018. The last round saw the tax on wine and cigarettes cut from 60 per cent to 50 per cent, while the tax rate on textiles and home appliances went from 30 per cent to 25 per cent
The decision was announced by Premier Li Keqiang at a routine State Council meeting last week, according to a statement on the government’s website, which also said the cut was designed to boost imports and consumer confidence.
“For those products that are used by the general public, we must effectively reduce the customs tax rate,” Li said in the statement. “The relevant departments will further study how to lower the price of necessary imports for the country.”
Two percentage points will not make a lot of difference. It is a difficult situation now [for consumption]. Perhaps a recovery in the housing market and a rebound in the stock market would really boost spending.
“Two percentage points will not make a lot of difference,” said Hong, referring to the small tax cut on some products. “It is a difficult situation now [for consumption]. Perhaps a recovery in the housing market and a rebound in the stock market would really boost spending.”
The tax has proven controversial among individual travellers since it was implemented in 2010. It also caused friction among government departments. At the time, the Ministry of Commerce issued discouraging correspondence to China’s customs agency, local media reported.
However, the cut comes as analysts grow increasingly concerned that consumption and trade are the weak points in the Chinese economy.
‘There’s a pickup in production but they need to get people out buying and consuming,” said Banny Lam, head of research at China Everbright Bank International Investment, referring to the pick up in the nation’s manufacturing sector in March.
The official purchasing managers index for the month jumped to 50.5, compared to 49.2 in February. A reading above 50 indicates growth from the previous month.
