It Is Difficult To Reach A Consensus Between Ideal And Reality &Nbsp; The Time Or Immaturity Of Luxury Tax Reform.

Recently, the World Luxury Association said, "China will surpass Japan in 2012 to become the world's largest consumer of luxury goods". The picture shows a woman attracted by tens of millions of Saudi royal jewellery at the world's top luxury exhibition held in Tangshan, Hebei at the end of May. With the controversy over the fate of luxury goods, experts and scholars stick to it. Just like Form a contention of a hundred schools of thought. Since this move is likely to implicate a wide range of views, the arguments from all sides naturally get different answers.

Focus: luxury tariffs or not?

According to the report released by the World Luxury Association in June 9th, the total consumption of China's luxury goods market has reached US $10 billion 700 million from the beginning of February 2010 to the end of March 2011, while almost all the Chinese people spent nearly 50 billion dollars on luxuries in the European market during the same period. The gap between them has reached 4 times.

Another data shows that by the end of 2010, the global luxury market had reached 172 billion euros. Among them, China Consumption of top consumer goods (including overseas consumers) accounts for about 15% of the world's total, while domestic luxury consumption accounts for only 5.5% of global consumption. This is evident from the serious outflow of luxury goods in China.

At a regular news conference held in July 15th, Yao Jian, a spokesman for the Ministry of Commerce, who advocated the reduction of luxury tariffs, first made a controversial statement among the two ministries. He said that the fundamental starting point for tariff adjustment for high-end consumer goods is to expand domestic consumption and demand.

The Chinese Business Federation also supports tax cuts. The association called for reform of domestic consumption related tax rates to prevent strong domestic purchasing power from going out. Instead of collecting high taxes at home and causing consumption outflows, it is better to lower domestic tax rates and keep purchasing power at home.

However, the Ministry of finance once again said publicly in July 18th: "there is no news about the reduction of luxury tariffs now, nor has it been considered in the near future." When explaining why the luxury goods tariff can not be reduced, the Ministry said: on the one hand, reducing the luxury tariff can not affect the price of luxury goods, nor can it bring the luxury goods purchased abroad to the domestic demand. Tariffs are very low in the price of luxury goods, and lowering tariffs will hardly affect their retail prices. On the other hand, lowering the tariffs on luxury goods is actually stimulating foreign countries. Economics Growth, not China.

Ding Jianchen, director of the Public Policy Research Institute of University of International Business and Economics, said in an interview with Xinhua news channel, that tariffs reflect national sovereignty and can not be reduced or eliminated easily.

On the question of whether or not the luxury tariff should be lowered, Ding Jianchen said: "no matter whether it is required to rise or fall, there is a certain reason." However, in any case, the current depreciation of RMB and appreciation of the outside world will make the rich richer and the poor poorer in the environment of the rising trend of RMB and the management of inflation expectations. Therefore, I advocate increasing tariffs on luxury goods, at least on the existing level. We should not talk about abolition.

The essence of confrontation: the confrontation between "ideal" and "reality"

After combing and analyzing the views of the parties, reporters found that from the purely economic point of view, few people questioned the advantages of reducing the luxuries tariff. At least no one suggested that lowering taxes would have an adverse effect on the economy. So why is such a "good" measure so entangled? After a little thought, it is easy to see that the most essential confrontation is nothing more than 2 points. First, whether tax reduction can really lead to a substantial reduction in luxury goods and effectively stimulate domestic consumption. Two, whether it will seriously affect China's future financial revenue, and is not conducive to the allocation and adjustment of social wealth.

For many of the current views, we should sum them up as "ideal" schools that support tax cuts and "realities" against tax cuts.

The so-called "ideal" faction is because almost all experts and scholars who support the reduction of luxury tariffs have agreed that after the tax reduction, the price of luxury goods will be levelled up to the international standard, so as to achieve the goal of retaining domestic purchasing power, and at the same time, by making a substantial increase in consumption power to make up for the "fiscal hole" brought about by the reduction of tariffs, such an optimistic attitude should be "ideal".

The so-called "reality" faction is because people who oppose tax reduction opinions take the current situation as the starting point. They do not recognize the idea of lowering taxes or depreciating prices, and do not help to stimulate domestic economic growth. At the same time, they believe that the fear of widening the gap between the rich and the poor is not conducive to the redistribution of social wealth. Such a cautious attitude is called "reality".

Ouyang Kun, the chief representative of the China Representative Office of the World Luxury Association, said: "in the world's most important luxury consumer countries, the average import tax rate of luxury goods in China is the highest in 30%-40%." Nevertheless, a reporter survey found that domestic luxury consumption is still relatively hot.

The Ministry of finance has explained clearly that the reason why we can not reduce the tariff of luxury goods is that because luxury goods are mostly foreign brands, no matter whether they are purchased at home or abroad, they will not help to stimulate China's economic growth, and it will be useless for China's economic restructuring.

Ding Jianchen said: "luxury tariffs are protective tariffs, mainly to play the economic functions of tariffs, to protect their immature industries. Now luxury has become a social hot spot. In fact, it reflects some trends of China's economic income gap and consumer culture, and it is not a good thing to pursue luxury goods. Luxury and flaunting luxury are not conducive to social harmony and stability, so there are no such conditions to reduce tariffs.

Sun Lijian, vice president of the school of economics, Fudan University, said in an interview with the international finance daily, "to stimulate China's domestic demand market, we must start with the middle class just beginning to form China. It is necessary to reduce the import tariff of luxury goods. " {page_break}

"Although all these luxuries are foreign products, the increase in consumption seems to be contributing to other countries, but higher import tariffs do not stop the spending power of the Chinese from going abroad to consume these luxuries," he said. Since China can not create such luxury, then do not even contribute to the service industry in other countries when consuming luxury goods.

Viewpoint Hedge: whether it can benefit the people or not?

According to "China's e-commerce market data monitoring report" in 2010, the scale of foreign exchange purchases in 2010 amounted to 12 billion yuan, of which cosmetics and luxury goods were the majority. Even though the tax rate was 40%, the annual revenue loss was as high as several billion yuan.

"It has not yet been counted that Chinese people buy luxury goods and cosmetics overseas through travel and other ways. If all of them are counted, the loss of tax burden is more than ten billion yuan." Wang Jianlin, chairman of the CPPCC National Committee and chairman of Wanda Group, sighed this year in the proposal of the two NPC sessions.

The increasing wage level has gradually changed the definition of luxury goods by Chinese consumers, such as imported milk powder and cosmetics, which are considered as necessities. In this regard, HSBC Global Research believes that reducing taxes on these commodities will help domestic consumption and enhance the competitiveness of local brands.
 

Wang Jianlin believes that China's current luxury import tax policy was mainly formed 20 years ago, when many goods in China were in short supply, and heavy taxes were needed to curb demand. But the vast majority of China's commodity supply exceeds demand, and the basis for the existence of high tax policy is no longer there.

In his view, the definition and scope of luxury goods change with the development of the times. Many commodities that used to be considered as luxury goods have become daily necessities. In the face of changes, policies should also be adjusted at the right time. At the same time, high taxes can not really inhibit people's consumption demand for luxury goods, but simply transfer the consumption to foreign countries.

Wang Jianlin said: "a large number of consumption can be transferred to other countries through tourism, which not only reduces domestic consumption, but also reduces employment and taxes, which means that Chinese people send jobs and taxes to other countries by air."

The reasons for the objection are equally loud. They believe that, in addition to the personal income tax, there are not many kinds of taxes that can be effectively regulated by taxpayers in the field of consumption in China. The main purpose of luxury consumption tax is to maintain social equity and adjust income distribution.

The "realities" group points out that, without levying new taxes, it will maintain a higher tax burden on high-end luxury goods, raise the cost of showing off wealth for the rich, and focus the relevant tax revenue on the development of disadvantaged groups and social undertakings, narrowing the gap between the rich and the poor, and rationally promoting the redistribution of wealth.

In response, Ding Jianchen said: "for the commodities related to the national economy and people's livelihood, such as medical equipment, teaching equipment and so on, the state should consider lowering the relevant tariffs, but it is unnecessary for luxury goods."

Tax reform Outlook: luxury tariffs will not be substantially reduced in the short term.

HSBC Global Research released a research report in July 20th, saying that China did not place too high expectations on the issue of luxury tariffs, and expected no substantial reduction in luxury tariffs in the near future.

The study shows that sales of luxury goods are mainly subject to VAT and import duties, and certain commodities such as jewellery and watches are subject to consumption tax. The tax revenue related to luxury goods reached 1 trillion and 200 billion yuan in 2010, equivalent to 78% of the central government's expenditure.

HSBC research and analysis pointed out that a slight decrease in luxury tariffs is not enough to motivate consumers to repatriate overseas shopping, nor is it enough to reduce domestic luxury prices and stimulate domestic consumption. At the same time, luxury tax declined significantly. Affluent The class is favorable. In the current political environment, such a tax adjustment is not necessarily permitted. Moreover, the pros and cons of the relevant departments regarding the reduction of luxury tax are still in the internal discussion stage. Therefore, the reduction of luxury tariffs in the short term may not be mature.