China Imposes 10% Sales Tax on Ultra-Luxury Cars

Today China began levying a 10% tax on luxury vehicles that retail for at least 1.3 million yuan ($188,900), Bloomberg News reports.

The country’s Ministry of Finance says the move is intended to “guide reasonable consumption.” The new tax follows previous calls by President Xi Jinping for less conspicuous spending, which caused a temporary slump in luxury car demand.

Bloomberg notes that the new tax is unlikely to deter sales among rich car buyers. But it may signal that China also will extend a tax cut intended to boost demand for small, efficient cars. The measure, which was introduced more than a year ago, halves the purchase tax to 5% on cars with engines displacing fewer than 1.6 liters.

The China Assn. of Automobile Manufacturers has been lobbying for months to make the tax cut permanent as a way to increase sales, reduce fuel consumption and improve air quality.