Preferential tax on small cars to expire

08:10, December 06, 2010      

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China will cancel the preferential purchase tax for vehicles with engines under 1.6 liters on January 1 next year, according to Xiaoxiang Daily News over the weekend, and buyers will have to fork out extra money to buy cars.

Citing an unidentified official with the National Development and Reform Commission, the country's top economic planning agency, the Wuhan-based newspaper reported that the tax policy would not apply next year due to rising buying sentiment.

"If stimulus measures to boost automobile sales expire this year, next year's sales will not grow as strongly as the previous two years," said Su Hui, an official at the China Automobile Dealers Association.

Previous reports also said that the 3,000 yuan (US$455) subsidy on purchases by rural citizens and to upgrade to new cars may also expire on January 1, 2011.

China halved the purchase tax for autos with engines under 1.6 liters to 5 percent in 2009 and kept the tax at 7.5 percent this year.

With the removal of the policy a buyer of a vehicle worth 80,000 yuan will have to pay 2,000 yuan more in tax.

The average car plate price in Shanghai in November surged to 45,291 yuan, the highest level this year, on concerns among bidders that purchasing costs and license fees could climb higher next year.

China overtook the United States to become the world's largest auto market last year after it sold 13.64 million units in 2009.

In the first 10 months of this year China's auto sales surged 35 percent annually to 14.68 million units to beat the total number sold last year.

The China Association of Automobile Manufacturers projected sales of vehicles to surpass 17 million this year.

Source: Shanghai Daily


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