New purchase tax to spur 8% rise in car sales

Shanghai, December 19 (Gasgoo.com) China's planned vehicle purchase tax for passenger cars is expected to raise car sales by some 8 percent next year after the auto market downturn, an industry report showed.

A study made by Guosen Securities Co showed if the tax cut is implemented, China's car sales are expected to grow by 8 percent or 410,000 units next year in contrast to the zero growth in earlier forecast. 

The report says the sales rise would accordingly bring the government 3.5 billion yuan ($512 mln) of auto consumption tax and 6.8 billion yuan of value-added tax.

The Chinese government is considering a proposal to cut the 10 percent tax paid by car buyers to 2 percent for engine sizes of up to 1 litre. The tax would be cut by less for larger cars, and stay at 10 percent for engines above 4 litres.

Another proposal is for the tax to be removed for passenger cars below 1.6 litres. A decision is likely to be made in the first half of next year.