The Ministry of Finance (MOF) announced publicly that import tariffs on luxury goods will not be lowered, but in fact will be further increased.
“At present there is no news about lowering tariffs on luxury goods, and no consideration will be given to this in the near future.” On the reason for not lowering tariffs on luxury goods, MOF explained that slashing tariffs on luxury goods would not affect the prices of luxury goods and could not translate the overseas purchase of luxury consumer goods to domestic demand. Since tariffs only account for a very small share in the price of luxury goods, tariff cut can hardly affect their retail price. Besides, the lowering of tariffs on luxury goods can only stimulate the economic growth of foreign countries but not China. As most of the luxury goods are foreign brands, no matter whether they are purchased in China or in foreign countries, they do not contribute to China’s economic growth. They also have no role to play in China’s economic restructuring.
But the Ministry of Commerce (MOFCOM) holds a different view to MOF on the issue of lowering import tariffs on luxury goods. MOFCOM reckons that tariff cut is the trend and that various departments share the same opinion. Yao Jian, press spokesman of MOFCOM, remarked again at a recent press briefing that reduction of import tariffs on luxury goods is the basis for expanding consumption.
The repeated gestures made by MOFCOM have led the market to guess that import tariffs on luxury goods are bound to be slashed. A survey found that the prices of such brand names as Chanel and Dior have already gone up.
“Since MOFCOM and MOF look at the issue from different angles, the two ministries have different considerations in terms of policy. But overall, MOF is the organ directly responsible for formulating various tariff schedules. As such, MOF’s view is probably more authoritative where import tariff cut is concerned.” Zhang Deyong, deputy researcher of the Institute of Finance and Trade Economics under the Chinese Academy of Social Sciences, pointed out that while the lowering of import tariffs on luxury goods helps expand the domestic consumer market, it would also impact the domestic industry. The policy-making departments should balance the interests between the two before deciding whether import tariffs should be adjusted downward.
