China announces plan to raise tax on big cars

Shanghai, August 14 (Gasgoo.com) The Chinese government has officially announced its plan to raise its car consumption tax on luxury vehicles of high emissions and cut tax on small cars as of next month, Xinhua reported on Wednesday.

From September 1, the tax on passenger vehicles with engine sizes greater than 4 liters will be doubled to 40 percent from 20 percent, the Finance Ministry and State Administration of Taxation said in a statement.

Those buying vehicles with engines sized from 3 liters up to 4 liters will have to pay a 25 percent tax, up from the current 15 percent, it said.

However, the consumption tax rate applied to cars with engines of 1.0 litre and smaller will fall to 1% from the original 3%, exactly the same with media forecasts.

"Autos are the giants of energy consumption and pollution emissions and this is a major part of the effort to conserve resources and reduce emissions," the ministry said, cited by the Associated Press.

Analysts say the tax adjustments will mostly benefit homegrown automakers by allowing them to gain higher profit margin and therefore boost their research and development capacities. But it remains to be seen whether the increases will have a significant effect on consumers' buying decisions.

Consumers of high emission vehicles will pay higher tax, China says