Report: China to Trim Tax Break on Small Cars

In January China’s central government will shrink the sales tax break on small cars it introduced last year, sources tell Bloomberg News.

The measure lowered the country’s sales tax from 10% to 5% on vehicles powered by engines that displace 1.6 liters or less. Next month the tax rate on those vehicles will rise to 7.5%, according to Bloomberg.

The discount has successfully revived sagging car sales. Deliveries through last month totaled 21.1 million vehicles, exceeding the 20.6 million units sold in all of 2015, according to figures from the China Passenger Car Assn.

Sales over the past two months have surged year on year because consumers expected the tax break to end in January. CPCA had lobbied to make the tax cut permanent to avoid creating a new sales slump.