Consumption Tax on Alcohol to be Imposed Strictly
[2009-08-10 11:14:26]
It is reported by CCTV that the state Administration of Taxation recently issues the Notice to implement new policy on consumption tax levying and managing so that government can effectively curb manufacturers to use transfer pricing for tax evasion. The new policy will give a greater impact on some enterprises that make profit form transfer pricing strategy
Over the years, China’s consumption tax on alcohol is computed with an ad valorem duty of 20 percent and a specific duty of 1Yuan per kilogram. But the implementation process has large operational room since consumption tax on wine goods is mainly imposed ad valorem in producing process. Therefore large-scale enterprises usually set up their affiliates for tax-avoidance. They sales their alcohols to the affiliates with a low price so that the affiliates can make greater profit by selling alcohols to dealers with higher price.
Given this situation, the State Administration of Taxation formulates Measures for the Administration on the Price for Excise Tax Assessment of Alcohol (Trial) aiming to assess the minimum consumption tax to lower taxable value for alcohols.
According to the Measures, if manufacturers sale Alcohol to their affiliates lower than 70% of the sales price that the affiliates sales to others, then taxation authorities will assess the minimum value of consumption tax for alcohols.
The new regulation of consumption tax on alcohol will be effectively solve the problems that manufacturers make use of their affiliates by price transfer to avoid consumption tax in production linkage, experts analysed that.
Over the years, China’s consumption tax on alcohol is computed with an ad valorem duty of 20 percent and a specific duty of 1Yuan per kilogram. But the implementation process has large operational room since consumption tax on wine goods is mainly imposed ad valorem in producing process. Therefore large-scale enterprises usually set up their affiliates for tax-avoidance. They sales their alcohols to the affiliates with a low price so that the affiliates can make greater profit by selling alcohols to dealers with higher price.
Given this situation, the State Administration of Taxation formulates Measures for the Administration on the Price for Excise Tax Assessment of Alcohol (Trial) aiming to assess the minimum consumption tax to lower taxable value for alcohols.
According to the Measures, if manufacturers sale Alcohol to their affiliates lower than 70% of the sales price that the affiliates sales to others, then taxation authorities will assess the minimum value of consumption tax for alcohols.
The new regulation of consumption tax on alcohol will be effectively solve the problems that manufacturers make use of their affiliates by price transfer to avoid consumption tax in production linkage, experts analysed that.
Source: ETCN
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