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UPDATED: July 18, 2011 NO. 29 JULY 21, 2011
Should the Government Cut Import Duties on Luxury Goods?
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Huang Weiping (http:www.chinanews.com): In the long run, it's inevitable the Chinese Government will reduce duties on luxury goods.

First, it has positive significance for society. If heavy tax burdens imposed on luxury goods are reduced, luxury items will be less expensive and the inclination of people to show them off will be reduced. It will bring a healthier atmosphere for consumption on the Chinese mainland.

Second, people have to admit medium- and high-level foreign luxury goods are better than domestic ones, no matter in design or quality. If greater quantities of foreign luxury goods come on to the Chinese market with less barriers and taxes, the whole of the market for consumption will be revitalized, which will force domestic enterprises to make better quality and better-designed products.

Zhao Ping (http://finance.sina.com.cn): The duties imposed on luxury products are not in accordance with the current consumption structure of Chinese citizens. Along with economic development, some of the heavily taxed items are no longer luxury products but are necessities of people's daily lives. Therefore, the situation should be addressed again and the government should reduce their tariffs.

Judged by these standards, products whose taxation should be reduced include clothes, food and cars. There is room also for reducing taxes on daily necessities such as watches, imported bags and hats.

Take cosmetics for example. Some are classified as luxury products and a 30-percent excise duty is levied on them. But now, most Chinese citizens are able to buy everyday cosmetics and the need to use excise duties to guide people's consumption structure has decreased in this aspect. The tax should be reduced.

Another example is imported milk powder. Although the government doesn't levy excise tax on it, tariffs are as high as 57 percent, which should be reduced to a more reasonable level after careful consideration.

Zhang Fang (http://www.yunnan.cn): Except for too-high tariffs, excise duty, sales tax, and value added tax have also been imposed on luxury products, in all making for price discrepancies between luxury products at home and abroad.

That's the reason for a shopping rush in the newly opened Kunming duty-free shops in southwest China's Yunnan Province. Countless Chinese tourists rushed into those shops because of lower prices and many luxury products even sold out. The reality in those shops proves, as long as the government cuts import duties on luxury goods to a proper level, it will bring back consumption power on luxury goods to the Chinese mainland and propel the domestic market.

Opponents

Liu Shangxi (http://www.mof.gov.cn): Duties on luxury goods are an important way to maintain social equality through imposing extra taxes on the rich and relieving poverty. It will cause negative results if we cut tariffs on luxury goods.

First, expanding domestic demand should be aimed at domestic products rather than foreign goods. Cutting luxury import duties will benefit foreign businesses much more than China's economic growth. Imported luxuries will easily be better value than home-grown products after tariffs are cut, affecting the development of China's own industries.

Second, cutting duties would further sharpen unequal income distribution. In recent years, the gap between the rich and the poor has grown, which has affected the health and stability of society. After all, only a minority of people can afford luxuries in China, while the majority still struggle for basic clothing and food every day. Cutting duties on luxury goods would encourage the consumption of luxury goods, exacerbating social injustice.

Finally, it is the main task of China's customs departments to impose tariffs on imported goods and protect the interests of home-grown enterprises. If we cut tariffs too greatly, foreign goods will soon occupy China's markets and influence the growth and development of domestic industry. For these reasons, China should not cancel or cut duties and taxes, but should enhance and expand them. This will truly conform to public opinion.

Wang Yayuan (http://finance.sina.com): The government shouldn't cut import duties on luxury goods.

First, it will directly harm the economy of Hong Kong, which is the most convenient place for people from the Chinese mainland to buy luxury goods. Hong Kong's economy is, to a large extent, based on the consumption power of the Chinese mainland.

Second, it will harm the luxuries industry in China. Home-grown luxury goods are alternatives to foreign luxury brands. If import duties are cut, it will be bad for the long-term development of domestically produced luxury goods. China will never have internationally famous luxury brands if import duties are cut.

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