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China aims to expand luxury goods, property tax

Wednesday, 28 Aug 2013 | 3:18 PM ET
Anthony Wallace | AFP | Getty Images

China plans to levy consumption taxes on more luxury goods and may expand a pilot property tax beyond Shanghai and Chongqing as it moves to reform the world's second-largest economy.

The official Xinhua news agency cited Finance Minister Lou Jiwei as saying Wednesday that the nation would levy consumption tax on goods that result in exploitation of resources and environmental damage.

Lou made the remarks during a session of the standing committee of the National People's Congress, China's parliament.

Pushing a strong reform line, China's leaders are looking to reshape the economy to one driven more by consumers than by exports, big industries and credit.

(Related video: Growth potential in Asia's luxury market)

The ruling party will hold a key meeting in November that will set China's economic agenda for the next decade, with tax reform likely to be a priority.

There has been much talk about widening property taxes as China's housing prices keep rising; cities where it might be imposed include Beijing, Hangzhou, Shenzhen, Qingdao and Wuhan. The tax is levied currently on owners expensive homes in Shanghai and Chongqing.

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Extending taxes on luxury goods would also fit with the government's drive to discourage ostentation—a goal linked to a broader attack on corruption.

Change in coal taxation

At the same time, a tax on goods associated with pollution correlates with the government's response to concerns over the environmental effects of decades of rapid growth.

Lou also said that a resource tax on coal will change to be based on price instead of sales volume, bringing it into line with the way the tax is applied to crude oil and natural gas, Xinhua reported.

(Read more: China's new inflation threat)

Revamping the coal tax has been on the agenda for years, but efforts at change have often stalled because of concerns that higher coal prices would disrupt growth.

Lou said that China had widened its value-added tax reform nationwide Aug.1 to reduce the burden on businesses.

The country intends to complete the reform of the VAT system by the end of 2015. The reform started in Shanghai in 2011 and was expanded to other cities and sectors in August 2012.

China has previously said it would scrap business and VAT for small firms.

—By Reuters

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