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China considers higher VAT on luxury goods

  • Aug 29, 2013 | Richard Asquith

China considers higher VAT on luxury goods

China is said to be reviewing introducing higher consumption tax / VAT on luxury goods and environmentally damaging goods.

Chinese VAT rise to curb ostentation

The Chinese news agency, Xianhua, said that despite its intention to shift the Chinese economy's focus from exports to consumption, it still wished to control excessive ostentation and graft.  It sees raising Chinese VAT on luxury goods (high-end watches, jewelry, cars etc.).  There is also plans to increase property taxes to help cool fast growing property speculation.

Chinese VAT is going through a country-wide reform at the moment, which started as China VAT pilot in 2011, and following extension to other regions.  This should be complete by 2015, and will give the country a boost in terms of reducing double taxation and cutting down on the VAT compliance burden.  China withdrew VAT on small companies in August 2013.

Hungary recently proposed a similar initiative, looking to raise Hungarian VAT to 35% on luxury goods.  However, the European Union would probably block such a move as member countries are not permitted to have VAT rates above the principle, standard rate.  This is currently 27% in Hungary.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.