China to Cut Luxury Import Taxes

on June 21 2011 | in Lifestyle Trends | by | with No Comments

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Pressure to keep luxury spending in China has been mounting.

China’s high import taxes of 50 percent for cosmetics and 30 percent for luxury watches have driven many rich Chinese to shop overseas and in Hong Kong.

Bain & Company reported that over 50 percent of luxury purchases by Chinese shoppers in 2010 were made overseas.

Because of hefty import taxes, prices of some luxury brands in China are 45 percent higher than those in Hong Kong, 51 percent higher than U.S. prices, and 72 percent higher than French prices, according to a study by China’s commerce ministry.

Now China is expected to cut its luxury import taxes to encourage the wealthy to buy their premium cosmetics, watches and liquor in China. This could come before the National Day holiday in October.

Duties on imported cosmetics, watches, clothes, suitcases and shoes could be reduced or even eliminated.

Meetings between luxury good makers and government officials from the finance and commerce ministries to discuss China’s new tax model have been held behind closed-doors, according to the 21st Century Business Herald.

The move to keep wealthy Chinese shoppers at home is in line with the Chinese government’s overall desire to boost domestic consumption to drive its economy.

[reuters]
photo credit: bloomberg

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