Studies On The Luxury Consumption Tax

After research on luxury consumption market of China for five years, Bain, a well-known management consulting company, proposed that Chinese luxury consumption market is growing fast at a rate of7%in the Mainland and20%oversea. Chinese has become the largest customers of luxury goods in the world. And greater China has replaced Japan as the second luxury consumption market.Subjective and objective standards for luxuries are in a constant flux, since the fast development and changing spending habits. Luxury spending in China is a typical kind of conspicuous consumption. Change character, what consumer goes after is luxury, brand and bringing the rewards of status, which means most of those customers prefer symbolic than tangible value. Our country has a large population and the income disparities arise, thus conspicuous consumption is more harm than good to economy and society.While luxury consumption market boom, adjustment policy on consumption tax on luxury goods is lagging. The primary advantages of consumption tax are regulating income distribution and promote social equity. After tax on luxury consumption, big spender taxed more than others, so that spending will be affected. So it can guide consumption and cultivate positive values and consumption conception.In the first and second part of this paper, it defines the concept of luxuries and the main object of the thesis. To this article, luxuries are the goods and services that beyond the needs of sustenance and development, and are able to meet customers’ specific needs. Since it is a subjective and dynamical definition, luxuries include different content in different historical background and social environment. This paper enumerates some typical luxuries, such as grade garments, jewelries, golf sport, private plane or yacht, high-grade residences or cars, etc.In addition, the demand elasticity determines the tax incidence. When supply elasticity remains constant, bigger demand elasticity means more tax burden to customers. For this reason, rich people who consume more luxuries should pay more consumption tax.Part three focuses on the primary problems on current China’s consumption tax on luxuries. According to the situation of economy and society, there are some shortages in present consumption tax system, which mainly involved tax range, tax rate, and the administration. Luxury’s not been correctly included in the scope of taxation may lead to the loss of state revenue sources, efficiency and fairness. Moreover, low tax rate and weak administration are bad to achieve adjust policy target.In order to seek ways to perfect current consumption tax system, it contrasted some different systems in other countries and regions in Part four.At Part five, based on the former presentation in the thesis, it put forward some rational suggestions to different questions about luxury consumption tax. At first, adjustment for the scope of consumption taxes to luxuries is needed. Cosmetics shall be cancelled, while grade garments, high-grade residences, private plane and golf sport should be included in the scope of taxation. Furthermore, hierarchical tax rate increase the progressivity of consumption tax system. Last but not least, improving administration standard and double efforts to propaganda and education on taxation are equally important.