China’s State Administration of Taxation and Ministry of Industry and Information have combined forces to attack the twin problems of quality control and lost tax revenues within the automotive industry in 2013.
A new policy on improving information management systems for car product qualification and vehicle purchase tax collection and optimisation, which comes into force on 1 April 2013, will require all automotive OEMs to upload information relating to product qualification certificates, while importers will have to record information related to the specification and serial number of all imported vehicles to a central system.
This information is vital to improve management standards for vehicle manufacturing plants and, it is hoped, will help reduce fake product qualification certificates and avoid stolen, smuggled or illegally assembled vehicles getting legal licenses in China.
The latest Structural Analysis of Tax Income Increase revealed that vehicle purchase taxes had reached Yuan 204,445m (about US$33bn) in 2011
This move comes as China attempts to improve quality and consumer protection in the automotive sector, and is complementary to new rules on automotive recalls, which came into force on 1 January.
From 1 July 2013, the information gathered under this new policy will also be used to link the information management system for product qualification certificates of vehicles, with the data system for vehicle purchase taxes.
The rapid expansion of the Chinese automotive sector has meant that vehicle purchase taxes have become an important part of China’s total taxation income. The latest Structural Analysis of Tax Income Increase revealed that vehicle purchase taxes had reached Yuan 204,445m (about US$33bn) in 2011. This equated to 2.3% of the total taxation revenues in China in 2011.
At present there is plenty of scope for consumers and distributors to avoid paying total vehicle tax. Examples include recording a standard model instead of a luxury one, or excluding the cost of accessories such as a GPS from the total cost on the invoice. It is also quite common for distributors to issue a vehicle invoice with a price lower than that which has been paid, thus reducing the tax payable by the consumer.
It is quite common for distributors to issue a vehicle invoice with a price lower than that which has been paid, thus reducing the tax payable by the consumer
Together with increasing revenue from vehicle purchase taxes, the sheer variety of vehicle configurations makes it difficult for the authorities to monitor and manage taxation without adequate information. Local tax bureaus often complain that, while the State Administration of Taxation periodically issues guidelines on vehicle prices where different configurations have different assessable prices, in most cases the actual configuration of a vehicle does not match that which is detailed in the product qualification certificate.
Once the new reporting system comes into effect, it will be possible for the Chinese tax authorities to cross-reference invoices with serial numbers and detailed specifications in order to protect their valuable tax revenues from the automotive industry, whilst driving up production quality.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Kelly Liu is an associate with CBM International Lawyers LLP, based in Beijing. She specialises in intellectual property and product liability law in China, especially for clients in the automotive industry.
The AutomotiveWorld.com Comment column is open to automotive industry decision makers and influencers. If you would like to contribute a Comment article, please contact editorial@automotiveworld.com.
