Official says vehicle tax cut won't be extended to next year

Shanghai, August 11 (Gasgoo.com) A senior official from China's industry regulatory body said it the government would reform the current vehicle purchase tax system but will not extend it to next year.

"We won't extent the tax cut when it expires at the end of this year but will make some adjustments in policies," the unnamed official of Chinese National Development and Reform Commission (NDRC), who is responsible for making industry regulations, said.

One problem of the existing (purchase tax) system is that it is calculated on the basis of the value of a vehicle, thus buyers of alternative-fuel vehicles would be forced to pay higher taxes, which run contrary to the government's intentions to promote sales of such vehicles, the commission once said.

Yang Zhiyong, a researcher at the Chinese Academy of Social Sciences, said that it still depends on market situations of the fourth quarter to decide whether to extend it but in the long term, the tax should be revoked.

On Jan 14, China launched a package to lower the purchase tax on cars with engines under 1.6-liter from 10 percent to 5 percent from Jan 20 to Dec 31 in a bid to spur domestic auto industry.

The government also gave one-off cash rebates totaling US$732m to owners of older vehicles who trade them in for newer, more fuel-efficient ones. The stimulus package has been very productive in pushing up vehicle sales so far this year by 23.38 percent to 5.37 million units.