China to Eliminate Tax Cuts for Small Passenger Cars

Tax goes back up to 10% beginning Jan. 1

China said on Dec. 28 that it would increase the purchase tax for small passenger cars next year, as authorities continue to wind back stimulus measures introduced to combat the global financial crisis.

Expectations that the government would soon scrap the tax cut has fueled demand for cars in the world's biggest auto market, with total sales accelerating in November from the previous month.

The finance ministry said the purchase tax for passenger cars with engines of 1.6 liters or less would be set at 10% from January 1.

Beijing, seeking to bolster the auto sector during the global downturn, had halved the purchase tax from 10% to 5% in January 2009. It raised the tax to 7.5% this year.

China's auto sales, which are already at record levels for the year, gathered pace in November as the total for the first 11 months sped past 16 million units, data from an industry group showed earlier this month.

A total of 1.7 million units were sold in November, up 26.9% from a year earlier, the China Association of Automobile Manufacturers said.

The growth rate was faster than the 25.47% year-on-year increase recorded in October.

China's auto sales for 2009 hit 13.64 million units as the nation took over the title of the world's top auto market from the United States.

Copyright Agence France-Presse, 2010

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