Shanghai motor vehicle purchase tax increased by 50% last year

The rapid increase in vehicle-related taxation: will car owners once again become the "tender meat"? Recently, a statistic published by the Ministry of Finance showed a fast growth in China's vehicle-related taxes last year. The vehicle purchase tax increased sharply by 54%, exceeding 179.2 billion yuan, ranking second only to the land value-added tax among major tax categories. Due to the termination of small-displacement vehicle purchase tax incentives this year, many automakers have halved their market growth forecasts, according to Jiangsu traffic violation inquiries.

Recently, I saw a bulletin on the website of the Ministry of Finance stating that the vehicle purchase tax grew rapidly in 2010, generating revenue of 179.203 billion yuan, an increase of 54.0% year-on-year. Vehicle purchase tax accounted for 2.4% of total tax revenue.

It is understood that the tax base for vehicle purchase tax is the total sales amount of taxable vehicles (including cars, motorcycles, electric vehicles, trailers, and farm transport vehicles).

The Ministry of Finance said there were two main reasons for the high growth in vehicle purchase tax revenue in 2010. First, automobile sales achieved rapid growth. In 2010, national automobile sales reached 18.0619 million units, increasing by 32.37% year-on-year. Second, the adjustment of the vehicle purchase tax preferential policy raised the tax rate for motor vehicles with displacement below 1.6 liters from 5% to 7.5% starting January 1, 2010, leading to a rapid increase in vehicle purchase tax.

Automobile companies lower expectations for this year's car market

I learned that, among the main taxes listed by the Ministry of Finance, the growth rate of vehicle purchase tax was second only to the land value-added tax (77.4%). Will we see a sharp contrast following last year's surge in purchase tax? Yesterday, I learned from the automobile market that due to the exit of multiple policies encouraging automobile consumption this year, many automakers have lowered their forecast for the 2011 car market growth rate to 10%~15%, which means halving the growth rates of 2009 and 2010. Because of the cancellation of purchase tax incentives for small-displacement models, many dealers even subsidize the difference in purchase tax for consumers themselves.

A salesperson from Dongfeng Nissan said that purchase tax incentives ended starting January 1. "Take Qida as an example; now you need to pay an additional one or two thousand yuan in taxes." According to my incomplete statistics, nearly ten brands across various markets are self-subsidizing the purchase tax for consumers.

Or influence the direction of the second review of the Vehicle and Vessel Tax Law

Last year, China introduced the draft of the Vehicle and Vessel Tax Law, which sparked controversy from various sides. One viewpoint urged not to treat private cars as "tender meat" and questioned whether the valuation-based taxation of vehicle and vessel tax would lead to "double taxation" with the vehicle purchase tax, according to Chongzuo traffic violation inquiries. With the rapid year-on-year increase in vehicle purchase tax, how the Vehicle and Vessel Tax Law will be finalized has drawn attention.

According to Shanghai media reports, after the first review of the draft based on engine displacement in December, over ten thousand opinions were collected. Therefore, before entering the second review in February, the draft will undergo partial adjustments. It is expected that the scope of low tax brackets may be expanded so more car owners can enjoy lower tax burdens, or research may consider changing the taxation threshold from 1.6 liters to 1.8 liters or other displacements. According to the original draft, the vehicle and vessel tax for cars over 1.6L will increase.