China may tax more luxury goods, expand property tax

BEIJING - China plans to levy consumption taxes on more luxury goods and may expand a pilot property tax beyond its current testbeds of Shanghai and Chongqing as it pushes ahead plans to reform the world's second-largest economy.

The official Xinhua news agency also cited Finance Minister Lou Jiwei as saying on Wednesday that China would levy consumption tax on goods that cause severe environmental pollution and over-exploitation of resources.

Lou made the remarks during a once-in-two-months session of the standing committee of the National People's Congress, China's parliament.

China's leaders have pushed a strong reform line as the plank of their economic policy, looking to reshape the economy to one driven more by consumers than exports, big industries and credit.

The ruling party will hold a key meeting in November that will set the country's economic agenda for the next decade, with tax reform likely to be a priority.

There has been much talk about widening use of property taxes as China's home prices keep rising, and cities where it might be imposed include Beijing, Hangzhou, Shenzhen, Qingdao and Wuhan. The tax is currently levied on owners of spacious and expensive homes in Shanghai and Chongqing.

Extending tax on luxury goods would also fit into the government's drive to discourage ostentation, itself a goal that is linked to a broader attack on corruption.


At the same time, a tax on goods that cause pollution will fit with the government's response to concerns raised by many Chinese over the impact on the environment from the country's decades of rapid growth.

Lou also said the current resource tax on coal will change to be based on prices instead of sales volume, bringing it into line with the way the tax is applied to crude oil and natural gas, Xinhua reported.

Plans to revamp the resource tax for coal have been on the agenda for years, but efforts to push through changes have often stalled over concerns higher coal prices would disrupt economic growth.

Lou also said that China widened its value-added tax reform nationwide, effective from Aug. 1 and as previously announced, in order to reduce burdens on businesses.

The country intends to complete reform of the value-added tax system by the end of 2015. The reform started in Shanghai in 2011 and was expanded to more cities and sectors in August 2012.

China has previously also said it would scrap business and value-added taxes for small firms.