Consumption tax aims to spur domestic purchases in China

China has introduced a new consumption tax on certain foreign products, a move that the authorities hope will encourage the population to purchase domestic goods instead. Tougher restrictions on overseas imports may reduce the price difference between luxury goods from abroad and those made in China, helping to create a level playing field for domestic businesses who will benefit from in-house spending. Goods purchased online will be treated as overseas imports rather than individual postal items, making them liable for Value Added Tax (VAT), tariffs and now, the consumption tax. This new tax strategy applies to more than a thousand goods traded online that account for the majority of demand in this industry.

China’s new consumption tax introduced Friday is believed to benefit domestic China retailers. Photo: Reuters