BIZCHINA / Opinions
Tax changes mean little to most prices
By Su Bei (China Daily)
Updated: 2006-03-23 08:48
The government's plan to make significant changes to the consumption tax
from April 1 will have little impact on the country's overall tax revenue
and consumer prices, economists said.
However, the most drastic changes for more than a decade will do much to
improve the country's tax system by adjusting income distribution and
guiding consumption and production, they added.
Ni Hongri, a senior researcher with the State Council Development
Research Centre, said there was little chance that China's tax revenue
would go up or down by much.
"It is an overall adjustment... taxes will be imposed or raised on some
products but will be reduced or even eliminated on others," she said.
The Ministry of Finance said on Tuesday that the government would raise
levies on vehicles with engines larger than 2 litres.
The government will also impose new charges on a wide range of oil
products such as aviation fuel, naptha, solvents and lubricating oil.
There will be new taxes on items such as disposable chopsticks, wooden
floor panels, golf balls and equipment, expensive watches and yachts.
The existing consumption tax on skincare products and shampoo will be
scrapped.
"The tax adjustments will not have a big impact on people's buying
behaviour and consumer prices as a whole," said Ni.
China's consumption tax policy has not changed since it was introduced in
1994. Since then, the economy has progressed very quickly.
Now, China needs a better consumption tax which is more in line with
current market conditions, said Peng Longyun, a senior economist with the
Asian Development Bank's Resident Mission in China. "The new tax system
will help the government to achieve this goal," he said.
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