China to Place Consumption Tax on More Luxury Goods

BEIJING, China — China will widen the scope of its consumption tax to include more luxury goods, the official Xinhua News Agency reported, a sign that some high-end brands may become more expensive for purchasers on the mainland.

The Asian nation is also targeting goods that cause heavy pollution or use excessive levels of energy for consumption tax adjustments, Xinhua said on its official microblog today. The news agency cited a report by China’s finance minister Lou Jiwei to the Standing Committee of the National People’s Congress.

High consumption and import taxes are already driving Chinese buyers to make luxury purchases overseas rather than at home, propping up European sales for brands from Prada SpA to Gucci. Close to a third of Chinese luxury buyers will shop in Europe in 2013, industry consultant McKinsey & Co. estimates, up from a fifth last year.

The news agency didn’t specify which new items would be taxed.

The country already has consumption taxes on a variety of products, including taxes of as much as 20 percent for high-end watches and 5 percent on gold, silver, platinium and diamond jewelry, according to research by HSBC Holdings Plc. Gem sets are subject to a 10 percent consumer tariff.

Chinese consumers are set to make up a third of luxury consumption globally by 2015, up from 27 percent in 2012, according to McKinsey.

By: Liza Lin, with assistance from Stephen Tan and Xin Zhou; Editors: Anjali Cordeiro, Gregory Turk