Although Chinese travellers must pay at least 20 percent more
for duties on watches and cosmetics purchased from overseas
markets, it is still much cheaper than buying them from local
shops.
The Ministry of Finance announced on Tuesday that starting from
the beginning of next year it will raise the tariff on individual
travellers' purchases of luxury goods from overseas nations and
regions. The tariff on golf clubs and relevant equipment and luxury
watches will increase from the current 10 percent to 30 percent,
and the cosmetics tariff will jump from 20 to 50 percent.
The new duty rates will also apply to such goods shipped from
overseas.
Experts say the increased tariffs will not undermine local
customers' desire to shop abroad, since those luxury goods are
still cheaper in foreign markets than those sold in the domestic
market, even after the imposition of the new duty rate.
"Mainlanders will still find it less expensive to fly to Hong
Kong, stay in a five-star hotel and bring back a 20,000 yuan
(US$2,564) watch than to buy it from a boutique in Beijing," said
Liu Xingli, editor of Trendstime.
"Domestic prices, with the combination of tariff, value-added
tax and consumption tax, are not as competitive as those in Hong
Kong and foreign marketplaces."
Taking niche watch brand Breitling as an example, the average
watch prices in Hong Kong only account for 70 percent mainland
prices, according to Shirley Ng, marketing manager of Breitling's
Hong Kong and Mainland Division.
Figures from the General Administration of Customs also indicate
that there is a large tax and duty gap between local and overseas
markets especially Hong Kong, where there is no tariff, and Europe,
where foreign travellers enjoy a tax refund.
For instance, the general duty on mechanical watches made of
precious metal is 80 percent, plus 17 percent value-added tax and
20 percent consumption tax, so the adjusted tariff on travellers'
overseas purchase of 30 percent is still very low.
It is the same case for cosmetics. For eye beauty products,
China imposes a general tariff as high as 150 percent, adding a 17
percent value-added tax and a 30 percent consumption tax, compared
with the new 50 percent duty on travellers' overseas purchases.
Liu said it is not surprising to see the government raise
tariffs on individual's overseas purchases after this April's
consumption tax adjustment. China imposed a domestic consumption
tax of 20 percent on luxury watches, and a tax of 10 percent on
golf clubs and related equipment.
Such a policy has driven many local customers from domestic to
foreign markets.
"The government wants to change this situation and stimulate
domestic consumption," he said.
Liu predicted that such a tariff will be further increased,
because in every country, taxes and tariffs on luxury goods are
crucial tools to balance the rich and the poor.
Even without the price difference, people prefer to buy from
abroad, said Yves Carcelle, Louis Vuitton's chairman and chief
executive officer.
(China Daily December 28, 2006)