China to raise vehicle purchase tax from Jan
China will increase the tax on vehicle purchases to 7.5 percent on those vehicles with engines of 1.6 liters or less, which will be effective from Jan 1 to the end of 2010, the Ministry of Finance said in a statement on its website Wednesday.
This year's vehicle purchase tax is 5 percent.
Liu Yuzhang, a professor at Central University of Finance and Economics, explained the 7.5 percent tax rate is more "appropriate" for China and the country's automobile industry. "If the tax rate is too low, the nation's tax revenue will suffer a loss, while if the rate is set too high, the stimulus package can't work," Liu said.
The stimulus package rolled out by the government in January boosted auto sales to 12.23 million units in the first 11 months, up 42.39 percent year-on-year, according to the China Association of Automobile Manufacturers.