China is considering a consumer tax overhaul.
The Finance Ministry has proposed a tax overhaul plan to the State Council. The plan may change after it is discussed by ministries that are part of the State Council. Reportedly, talks include raising alcohol and tobacco taxes.
The State Council weighs such proposals and seeks input from other ministries before deciding whether to proceed with a plan or send it back for modification.
Good reasons
The tax overhaul, especially an increase of alcohol and tobacco taxes, is needed for two reasons:
- To keep up with shifting consumption trends as products once seen as luxury goods are now every day items for China’s rapidly expanding middle class.
- To foster healthier habits and improve public health and societal development in China.
Healthier habits
The central government mandates and collects taxes nationwide on consumer goods, which brought in revenue of 1.1 trillion yuan ($165 billion) last year, Finance Ministry data show. Most consumer goods are exempt from the tax, which applies to products including cosmetics, alcohol, tobacco, jewelry and fireworks sold by retailers and wholesalers.
A tax overhaul and increase in alcohol taxes would be a step toward a transparent tax system that also aims to encourage healthier consumption habits.