The current Consumption Tax (CT) regime in China has been implemented since 1994. As a turnover tax imposed on certain specific consumer goods, CT played a positive role in collecting fiscal revenue, guiding industry development, promoting energy conservation and environment protection as well as optimising consumption structure. With the continuous economic growth, change in consumption pattern of residents as well as the need for energy conservation and environmental protection, the taxable scope, tax rate, collection stage as well as administration measures of CT need to be reformed. To respond, the Ministry of Finance (MoF) and the State Administration of Taxation (SAT) are in the process of reforming CT in China.
We observed that China has gradually implemented CT reform measures in recent years. For example, levying CT on super-luxury small motor cars at the retail stage; narrowing the taxable scope of cosmetics goods as well as reducing the tax rate for certain cosmetics goods; raising the ad valorem CT rate plus levying an additional CT based on quantity on cigarettes sold at the wholesale stage; raising the per litre tax payment on certain refined oil; imposing CT on batteries and coatings. These measures not only changed the taxable scope and tax rate, but also the collection stage, which indicates the strategy and the direction of the CT reform in China, that is constantly improving the CT regime by steady adjustments and advancing the CT reform at appropriate time. In this issue of China Tax/Business News Flash, we will look back at the CT reform implemented during the recent years, look forward to its development, analyse the impact on taxpayers and share our observations and views.
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