Vehicle Sales Tax Rebates to Extend into 2010

Tax policies encouraging consumers to purchase fuel-efficient vehicles that were set to expire at the end of the year will be continued into 2010.
Vehicle purchase taxes released in March were halved for vehicles with engines of 1.6 liters and below were expected to expire on December 31.

The preferential tax policy won't end next year, but the concrete measures are likely to be adjusted, according to the Shanghai Securities News.

The Ministry of Finance and the National Development and Reform Commission are reportedly planning to make a choice between two options.

Vehicle types covered in the policy will be expanded next year. Either the current favorable policy will go on, with lower emission vehicles enjoying more tax breaks, or rebates will be based on fuel consumption.

Lang Xuehong, deputy general manager of the automotive department with Sinotrust, a supplier of marketing and credit solutions in China, said previously that a multi-layered sales tax structure is likely to replace the present policy.

Both the industry and consumers have been hoping for an extension of the policy, which is credited with spurring domestic demand onto record heights this year, helping China become the world's leading car market ahead of the US.

Sales of low-emission vehicles of 1.6 liters and below reached 5.06 million from January to September, up 60.43 percent over the same period last year, according to the China Association of Automobile Manufacturers (CAAM).

The low-emission vehicle sales share of the passenger vehicle market hit a record high to reach 69.89 percent in the first nine months, compared with the 62 percent last year.

According to a survey recently conducted by China Business News and gasgoo.com, an auto website, 62 percent of the respondents said that the preferential tax policy had an influence on their consumption behavior, 28 percent said that they will buy vehicles before the policy expires, and 20 percent stated that if the policy ends, they will delay their buying plans.

Dong Yang, executive deputy president of CAAM, was quoted by the Shanghai Securities News as saying that the policy of halving the tax should be continued indefinitely, in order to reduce emissions and boost domestic demand.

Many carmakers are also reportedly calling for continuing stimulus policy. 

Some experts suggested that the sales tax rebates should benefit more consumers from different niche markets.