Draft on the Adjustment of Vehicle and Vessel Tax Showing Its Sprout

Some media reported on May 19, 2010 that, relevant authorities in China have preliminarily ruled on adjusting the vehicle and vessel tax, with the draft open to opinions of some auto enterprises. Unlike the previous mode of taxing on the size of seats and types, the draft changes to taxing on displacement and raises the tax amount considerably. As per some expert, if China makes this adjustment, the main aim is to balance the development of industries and to achieve the goal of low carbon and emission cuts.

The draft plans to impose the vehicle and vessel tax on displacement by gradients so as to encourage energy conservation and emission reduction, the greater displacement, the more increase in tax amount. The auto types with displacement of not more than 1.0 liter are the first grade, that of between 1.0 liter and 1.6 liters are the second grade, that of between 1.6 liters and 2.0 liters are the third grade, and those auto types with large displacement of not less than 4.0 liters are the last grade. The vehicle and vessel tax on small automobiles with displacement of not more than 1.0 liter will not be adjusted; the minimum annual tax amount for that of between 1.0 liter and 1.6 liters will be CNY 360, and the maximum amount will be CNY 1080; the vehicle and vessel tax on automobiles with displacement of 2.0 liters is planned to start from CNY 900; and the tax threshold for luxury automobiles with displacement of not less than 4.0 liters will be higher than CNY 3500, with the highest may raised to CNY 10,000.

According to the draft, the vehicle and vessel tax on small automobiles with displacement of not more than 1.0 liter will not be adjusted; and those taxes for that of between 1.0 liter and 1.6 liters are relatively low, reflecting the trend of China in developing automobile industries.