BEIJING – Battling to control its energy bills, the Chinese government announced a sharp tax increase on big cars Thursday and a matching reduction for people who buy smaller models.
The tax measures, issued by the Finance Ministry and published in the official press, marked the latest step in a so-far fruitless government campaign to persuade increasingly flush Chinese motorists to stop buying gas-guzzling prestige sedans or heavy sport utility vehicles.
The taxes, although they touch only a few of China’s 1.3 billion people, reflected growing unease in the Communist Party over a rapidly widening gap between China’s newly rich and the millions of poor who have not profited from the past 30 years of economic reform.
In the measure expected to have the widest impact, the ministry said sales taxes on passenger cars with an engine displacement of more than two liters will rise April 1 from 8 percent of the car’s value to a range of from 9 to 20 percent, depending on the size of the engine. The tax on cars with an engine displacement below 1.5 liters will be cut from 5 percent to 3 percent, it added, and the rate for cars between 1.5 and 2 liters, which covers most big-city taxis, will remain at 5 percent.
The new rates seemed designed principally to discourage newly wealthy Chinese from flaunting their riches by driving high-consumption cars, including the large four-wheel-drive vehicles that have become fashionable. At the same time, the tax reduction on smaller cars was seen as an attempt to nudge first-time middle-class buyers toward economy cars rather than the multi-passenger vans or luxury sedans to which they often aspire.
As the economy booms with more than 9 percent growth annually, such automobile purchases have become a widely accepted rite of prosperity among increasingly well-off professionals, businessmen and senior functionaries. The number of cars on Chinese roads has doubled during the past five years to reach an estimated 17 million cars, according to the National Statistics Bureau, and the sight of large Mercedes, BMWs and Audis vying for space on crowded streets has become commonplace.
Traffic jams and exhaust pollution have become legendary in many cities, particularly Beijing, and China’s bill for imported oil has risen dramatically. The government has forecast oil imports will rise to 190 million tons by the end of the decade, up from 123 million in 2004. Gasoline consumption is a big part of the total. The government’s Development and Research Center estimated that cars will consume 138 million tons by 2010.
Despite the rising bill, about 80 of China’s large cities have instituted traffic regulations that bar or restrict use of small cars on major streets. The official explanation is that small cars go slowly and hinder traffic. But many Chinese attribute the bans to pride in the country’s new wealth and a desire by image-conscious officials to move as far as possible from the putt-putting two-stroke tractors that defined motoring here in an earlier era.
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