Home About SAT News Tax System Tax Revenue Exchanges and Cooperation Hot Topics
Vehicle and Vessel Tax: Minor Taxes Have Significant Impact

Issuance Date: July 24, 2017     Source: General Office of the State Administration of Taxation

Vehicle and vessel tax is a property tax levied on owners of vehicles and vessels. Since the Vehicle and Vessel Tax Law of the People's Republic of China, the first law on property and behavior tax in China, was implemented in 2012, tax authorities have established the vehicle and vessel tax management system that integrates joint governance, deduction in the sources, connected collection and convenient services, based on the features of vehicle and vessel tax, namely scattered tax sources, strong liquidity and difficulty to manage. These measures, as believed by experts, scholars and insiders, have effectively strengthened tax collection and payment services, and made good use of the roles of the vehicle and vessel tax in guiding green consumption, adjusting wealth distribution, and refining the natural person tax management system.

Policies take the lead to guide green consumption

China's vehicle and vessel tax is categorized into 7 levels by displacement of passenger cars. "Such an incremental tax system plays a positive role in guiding green consumption." The vehicle and vessel tax also gives tax breaks to new energy automobiles, enhancing the guiding mechanism for green consumption, according to an official at the Property and Behavior Tax Department of the State Administration of Taxation (SAT).

"With government subsidies and reduction of vehicle and vessel tax, new energy automobiles have stronger value for money compared with traditional fuel-powered automobiles in the same configuration." Ms. Tang from Jinhua, Zhejiang chose a new energy car after repeated comparison. "The model chosen by Ms. Tang is RMB 90,000 less than the benchmark price after the refunds of discounts and subsidies." According to Cheng Jian, sales manager at Zhejiang Haozhong Auto, the duplicate effect of the deduction of vehicle and vessel tax and government subsidy policy has aroused consumers' interest in buying a new energy car. The tax breaks policy has further strengthened guidance on green consumption. From 2012 to 2016, 4.785 million units of energy saving automobiles and new energy automobiles enjoyed tax breaks, with the vehicle and vessel tax reduced by nearly RMB 1 billion.

Positive adjustment is playing its role

Auto displacement is positively related to the prices. Collecting vehicle and vessel tax based on displacement can positively boost adjustment and allocation.

The number of taxable small and medium-displacement passenger cars whose displacement was lower than 2.0 liters accounted for 92% of total number of taxable passenger cars in 2016, with the tax revenues from vehicles and vessels making up 69% of all the tax revenues from passenger cars; while the number of taxable passenger cars with displacement of over 2.0 liters was 8% of the number of all taxable passenger cars, contributing 31% of tax revenues.

These data show that people favor small and medium-displacement cars, according to an official from the Property and Behavior Tax Department of the SAT. Small and medium-displacement cars constitute the majority of cars bought by consumers while large-displacement cars constitute the minority, which is in tune with the policy orientation of green consumption guided by the incremental tax mechanism for vehicles and vessels.

Offer reference to the refinement of tax administration for natural persons

To standardize the management of vehicle and vessel tax, the SAT has introduced myriads of measures to boost joint governance, enhance deduction in the sources, promote connected collection and provide convenient services. In particular, deduction in the very source is the key. Tax authorities have cooperated with public security authorities, transport and traffic authorities, and maritime authorities for joint administration and governance, built two mechanisms respectively for commissioned collection of motor vehicle tax and entrusted collection of vessel tax, and intensified source control by ensuring tax and insurance are in sync, which is an effective lever. "Car owners must pay vehicle and vessel tax before buying the compulsory insurance against traffic accidents of vehicles," said the financial head of Zheshang Property and Casualty Insurance Company Limited Henan Branch.

Information-based tax administration is an important means to administer vehicle and vessel tax. 32 provinces and cities across China have achieved online tax collection together with insurance companies. Through the information-based administration processes ranging from connected tax and insurance payments, to automatic taxation and real-time monitoring, they have a deep understanding of the details of commissioned collection by insurance companies. Tax authorities in Qingdao and Shenzhen also have established a mechanism with maritime authorities for vessel information sharing and connected tax collection, with maritime safety authorities calculating and levying vehicle and vessel tax on a commission basis to ensure collection of vehicle and vessel tax at the same website.

"Taxpayers also can pay vehicle and vessel tax through a public WeChat account, and self-service tax handling machine can print the voucher for online payment," said Mr. Wang, a taxpayer governed by the taxpayer service hall of Guangzhou Yuexiu District Local Taxation Bureau. Regional tax authorities are committed to introducing convenient tax processing measures to offer convenience to taxpayers. For example, Shanxi Local Taxation Bureau established a vehicle and vessel tax payment and inquiry system for taxpayers, and Zhuhai Municipal Local Taxation Bureau launched a window for processing vehicle and vessel tax across the province.

According to Xu Zhengzhong, professor of the Department of Economics at the Chinese Academy of Governance, tax authorities have accumulated beneficial experience in collecting vehicle and vessel tax in terms of putting legislation first, information-based tax administration and convenient taxation services, enabling such a minor tax to play a great role, and providing references for pressing ahead with tax legislation, refining the tax administration system for natural persons and enhancing the property tax system.

Copyright © State Administration of Taxation of The People's Republic of China. All Rights Reserved