Auto Purchase Tax Cut to Continue into 2010

December 2, 2009 Taxation in China

Chinese Policewoman directing traffic at junctionWith booming car sales in the last months, experts and Chinese officials are confident that the country’s automobile sales tax cuts will continue next year.

Although there is no official confirmation of any future moves, in his last interview Chang Xiaocun, head of China’s Commerce Ministry’s department of market system development, was quite confident that the Government is interested in extending the auto purchase tax cut program. Additionally to his words, some experts believe that the tax cut program could even be extended to more types of passenger cars.

The auto purchase tax cut program was started by the Government of the People’s Republic of China on January 20th, 2009, and reduced auto sales tax by 50% on cars with engine capacities below 1.6L. With a new sales tax of 5% only, the car market in China went through a dramatic boom in growth. Additionally to substantial tax cuts, the program also allowed the population of rural regions of China to trade-in old cars for subsidies on new automobile purchases. Just within the first ten month of the program’s operation, auto sales increased by almost 38%, compared to the same period last year. Comparatively, in 2009, the bailout of one of the largest US car manufacturers, GM, has cost each US tax payer an approximated US$12,200. But in GM’s Chinese manufacturing facilities a growth rate of 5% to 10% is expected.

Thanks to the tax cut program, in a country where private passenger cars were a rare luxurious just a few years ago, the car sales market has, for the first time, hit the 10 million unit mark.

Photo by dcmaster

Tags:  ,