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China Offers Tax Incentive for Low Pollution Cars
China announced it will cut the consumption tax by 30 percent for cars that have reached the European 2 emission standard.
According to a joint notice released by the Ministry of Finance and the State Administration of Taxation (SAT) recently, the cars subject to the tax reduction include passenger cars, all-terrain vehicles and compact cars.
To be eligible for the tax reduction, car manufactures must have their products examined by government-authorized quality control agents.
This move is aimed to encourage Chinese car manufactures to meet higher environmental protection standards that are currently in effect in Europe.
Since 1994, China has adopted a three-tiered consumption tax on cars. Depending on the size of cylinder volume of engines, the tax rates are 3 percent, 5 percent and 8 percent respectively.
Therefore, a 30 percent cut will lower the tax rates to a range of 2.1-5.6 percent.
The tax reduction takes effect from January 1, 2000. The lower tax rates will benefit Chinese manufacturers the most because imported cars are subject to higher tariff rates.
China has already adopted a compulsory limit for automobile emissions that is equivalent to the European standards of the 1980s.
According to international agreements that it has signed, the country will adopt stricter standards on the level of emissions in the next few years.
The Chinese capital city Beijing put into effect the European 1 standards for car emissions since the beginning of 2000. These standards, equal to those of Europe in the 1990s, are the strictest used in any Chinese city.
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