China, Socialism & Consumer Behavior: China to cut tax on luxury goods

China, already the world’s second-largest luxury goods market, will soon slash import duties on “opulent items” to encourage wealthy local shoppers to buy more pricey cosmetics, watches and liquor:

China’s high import duties of 50 percent for cosmetics and 30 percent for high-end watches have driven many rich Chinese mainland consumers to shop in Hong Kong, London and Paris, a trend that several Chinese ministries want to change, the 21st Century Business Herald reported.

Citing unidentified sources, the paper said China’s finance ministry may unveil a revamped tax system before the National Day holiday in October so that Chinese consumers can buy luxury brands such as Christian Dior and Louis Vuitton at home over the Christmas and New Year holidays.

The bid to keep well-heeled Chinese shoppers at home is in line with Beijing’s over-arching plan to boost domestic consumption and cut China’s dependence on exports to drive its economy, the world’s second largest.

With the new taxes, duties on imported cosmetics, milk powder, watches, clothes, suitcases and shoes are expected to be reduced or even scrapped entirely, it said.

Luxury good makers and government officials from the finance and commerce ministries have held closed-door meetings to discuss China’s new tax model, the newspaper reported.

Owing to hefty import taxes, prices of 20 luxury brands of watches, suitcases, clothes, liquor and consumer electronics in the Chinese mainland are 45 percent higher than those in Hong Kong, 51 percent higher than US prices, and 72 percent higher than French prices, a study by China’s commerce ministry showed.

Chinese tourists are the biggest group of foreign shoppers in France, buying 650 million euros ($933.7 million) of duty free items in 2010, a recent survey by Global Refund showed.

Investment group CLSA forecasts that China will become the world’s largest market for luxury goods by 2020 as China’s burgeoning middle class indulges in high living.

via China to cut tax on luxury goods: report.

Itamar Medeiros

Originally from Brazil, Itamar Medeiros currently lives in Germany, where he works as Lead Product Design Strategist at SAP and promotes User Experience Design as visiting lecturer at Köln International School of Design. Working in the Information Technology industry since 1998, Itamar Medeiros has helped truly global companies in several countries (Argentina, Brazil, China, Germany, Hong Kong, India, Mexico, The Netherlands, Poland, United Arab Emirates, United States) create great user experience through advocating Design and Innovation principles. During his 7 years in China, he championed the User Experience Design discipline as User Experience Manager at Autodesk and Local Coordinator of the Interaction Design Association (IxDA) in Shanghai

1 Response

  1. July 7, 2011

    […] It seems that Chinese Government is not speaking at one voice on this issue: just a few weeks after announcing cuts of taxes for luxury products, a Chinese Research from the Ministry of Finance said that “Far from cutting taxes on […]

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