Tax Cuts to Certain Chinese Imports Likely Won't Have Large Effect

China’s April 9 decision to lower taxes on certain imported goods likely won’t have a large impact on imports or trade, according to an expert on China business. The move, announced by the Chinese Ministry of Commerce, will reduce the tax rate on certain goods -- such as books, computers, food, furniture and medicine -- from 15 percent to 13 percent. It will also reduce import tax rates on other products, including sporting goods, textiles and electronic appliances, from 25 percent to 20 percent (see 1904080006).

Kyle Freeman, a China business advisory manager with international investment firm Dezan Shira & Associates, said the tax rate reduction will only benefit “some individual consumers” because it largely applies to China’s postal service and a “narrow range” of e-commerce imports. “[It] likely won’t have a significant effect on increasing domestic consumption,” Freeman said in an email.

Freeman said most of China’s cross-border e-commerce imports are subject to “more traditional” duties, like value-added taxes, which China’s General Administration of Customs has taken steps to reduce (see 1903220054). “China’s recent [individual income tax] reforms and reduction of VAT rates are the more noteworthy reforms and will likely have a more significant effect on businesses and consumption,” Freeman said.

The “tax on baggage and articles accompanying incoming passengers and personal postal articles” won’t include reducing the tax rate on wine, cigarettes, jewelry, golf equipment, luxury watches and “high-grade cosmetics,” according to a report from the South China Morning Post. The tax rate for those items will remain at 50 percent.