Vehicle tax hits wrong targets in green drive
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A new revised vehicle and vessel tax provision published online for public comment has generated over 87,000 posts, most of which are highly critical.
The vehicle tax has been widely attacked as a further burden on Chinese consumers. But this isn't the only thing that enrages consumers.
The majority of the complaints center around claims that the tax isn't being imposed in a scientific or fair fashion. Using the volume of vehicle engines as the taxation yardstick is at the center of the controversy. According to the revised draft, taxes on cars with engines bigger than 1.6 liters but smaller than 2.5 liters will increase by as much as 960 yuan ($141). For cars with engines bigger than 2.5 liters, there will be an 4,740 yuan ($694) increase.
But taxes on vehicles with engines smaller than 1.6 liters remain unchanged. In an earlier explanation of the draft, an official from the Chinese Ministry of Finance said, "As a kind of property tax, vehicle tax encourages lowering energy consumption and emissions."
Industry analysts pointed out that such statement is itself contradictory: How can a "property tax" for balancing social wealth also regulate emission control?
The problem can be easily spotted. A car with a 2.0 liter engine costs less than other cars with 1.8 liter engines, but under these standards the owner will still have to pay a higher tax than if he or she bought one of the more expensive vehicles.
A 2.0 liter engine Audi might be worth 30,000 yuan ($43,940) more than a Nissan of the same engine volume, but both would have the same tax imposed on them.
Does this seem like a reasonable form for property tax?
When vehicle owners buy a car, they're already paying a purchase tax, which is a form of property tax. So the new vehicle laws overlap with the existing purchase tax and become a double burden. Since the vehicle tax is clearly unfair, people are theorizing that local governments, which will collect the tax, have a vested interest in the policymaking process.
The tax is not much better from an environmental perspective. An engine's volume does not necessarily correlate with the energy it consumes or the pollution it produces.
For example, a van with a 1.6 liter engine uses more energy and produces more emissions. More advanced technologies also make a substantial difference in emissions and energy consumption.
Using engine volume as the only standard is unfair, and doesn't encourage improvements in technology.
Experts also argue that taxes should serve a single clear purpose, so as to avoid unfairly burdening consumers. Making a tax serve both as a property tax and an environmental tax is confusing and inefficient.
So how do we unwind these confused tax provisions?
If their main purpose was environmental, a fuel oil tax would be a good option. The vehicle tax means that, no matter how much energy is consumed, the rate for engines of identical size remains the same, encouraging people to consume more. A fuel oil tax, which is directly related to the amount of energy consumed, is far fairer in this regard.
If China does want to use a vehicle tax, energy efficiency should be taken into consideration, instead of using engine volume as the only yardstick. Only in this way can the vehicle market be directed toward smaller engines and low energy consumption, while encouraging technological upgrades.
The government's intentions are no doubt good when it comes to protecting the environment. But energy saving and environmental protection is such a huge project that any single tax method can't tackle it.
As more and more cars appear in streets, making each tax policy well targeted and practically workable still remains a challenge for the government in its attempts to construct an environmentally friendly society.
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