Tax on vehicles to rise in China

SteelOrbis Shanghai Chinese Ministry of Finance announced on March 21, 2006 that the consumption tax imposed on vehicles would be increased by a large scale as of April 1, 2006. With the increase, the maximum consumption tax for large passenger vehicles and luxury goods such as yachts with large cylinder capacity and therefore with large gas emission and oil consumption will increase from the current 8 percent to 20 percent. With the new policy, the taxes for passenger vehicles, including the cross country vehicles, are divided into six classes: 3 percent for vehicles with smaller than 1.5 liters cylinder capacity, 5 percent for 1.5 to 2.0 liters, 9 percent for 2.0 to 2.5 liters, 12 percent for 2.5 to 3.0 liters, 15 percent for 3.0 to 4.0 liters, and 20 percent for more than 4.0 liters. The tax for commercial vehicles will be 5 percent, and those vehicles which are energy saving and environmentally friendly can benefit from the preferential tax policy. Besides, the current 10 percent consumption tax for motorcycles will be divided into two classes: 3 percent for motorcycles with less than 250 milliliters cylinder capacity, and 10 percent for those with more than 250 milliliters. With the policy, the government encourages the production and use of vehicles with small emissions. The increase in consumption tax for automobiles will have a great influence on the restructuring of the auto industry.