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China hikes tax on imported luxury cars

Posted 4:31 a.m. Thursday
Updated 4:32 a.m. Thursday

— Chinese buyers of eye-poppingly expensive luxury cars will have to pay extra under Beijing's latest effort to rein in ostentatious spending.

The communist government has added a 10 percent import tax, effective Thursday, on "super-luxury vehicles" priced above 1.3 million yuan ($190,000). The Finance Ministry said it is aimed at encouraging "rational consumption" and curbing energy use and emissions.

Chinese leaders are trying to nurture domestic consumption to reduce reliance on trade and investment, but worry extravagant spending by the elite is politically dangerous at a time of slowing economic growth.

The government of President Xi Jinping has imposed a steadily widening series of austerity measures since 2013 to discourage corruption and what Beijing deems excessive spending. They have chilled revenues for high-end restaurants and sales of brandy, designer handbags and watches and other luxury imports.

It wasn't clear whether the latest tax, which explicitly targets imports, might run afoul of Beijing's World Trade Organization commitments to treat foreign and domestic goods equally.

China has been the fastest-growing market for Rolls Royce, Ferrari and other luxury automakers, with some reporting annual sales gains of 50 to 100 percent in recent years.

The latest tax comes at a time when overall auto sales growth is slowing. Beijing helped to pull the market out of a slump last year by suspending a sales tax but that cut is due to end on Jan. 1.

Buyers of luxury cars also pay taxes including one based on engine size that can add up to 40 percent to the purchase price.

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