At present, China should not rush to levy a luxury tax

According to the development of the international economy, people concerned proposed the levy of luxury tax, hoping to use luxury tax to achieve the purpose of promoting social fairness and adjusting the income gap. However, in reality, there are many prerequisites for the taxation of luxury goods. Therefore, I believe that the current levy of luxury tax is unrealistic.

The prerequisites and conditions of the levy

Taxation on high-priced consumer products or behavior has a strong "value" or "normative" connotation. It can be based on the purpose of maintaining the simple atmosphere of the society, and it can also be rooted in the concept of promoting tax fairness. The former intends to increase the price of the goods or services through the levy of luxury goods, resulting in a price-based effect and the purpose of changing the luxury consumption habits; the latter, pursuing the levy of luxury tax, from high income earners. In the process of high consumption, high-tax taxes are levied to achieve fair taxation and safeguard social justice.

However, in reality, there are still many differences in people’s understanding of the luxury tax. The most important point is that it is very difficult to define luxury goods and there is no clear standard for identification. Although there are vague concepts in the consumption of luxury goods in the society, there are no scientific taxation criteria and standards in practice. For what is a luxury product, generally, it is determined by the price of the product or the category of the product. But strictly speaking, using the price or category of a commodity as a standard is not entirely reasonable. In the modern society, where product diversification and refinement are emphasized, almost every type of product has the same high and low price difference. If the price is high, the products that meet the meaning of luxury taxation will be listed. If the decision is made as to whether or not taxation is based on whether or not it is a product that is often consumed by the high-income group, there is a problem that it is difficult to make a judgment because it is impossible to carry out a clear and complete investigation.

In addition, the tax system often hides taxes that are taxable on luxury goods, such as consumption taxes on golf equipment. If luxury tax categories are created, the nature of taxation on luxury goods contained in such taxes should be removed, otherwise there is a risk of double taxation.

Uncertainty of the results

How effective is the levy of luxury tax? What should be the tax standard and tax rate? When is the right time? This series of issues has yet to be discussed in depth. Taxes on luxury goods should not be implemented rashly, and the government needs to improve tax collection rules.

Levy tax on luxury goods can guide people to use domestic products? People concerned believe that the purpose of the levy of the luxury tax is not the taxation. Its purpose is multiple, including the maintenance of the fairness of the tax system and the suppression of improper waste. In particular, the high-priced goods of some countries are mostly imported. The introduction of a luxury tax can guide people to use domestic goods and promote the development of domestic industries. However, after all, consumer psychology cannot be speculated by various theories. Levy of luxury tax will not guide people to use Chinese goods to judge.

Tax time. If not for the right time, no choice of the right item, no use of the right method, the luxury tax policy is no good. In order for this tax increase policy to be implemented smoothly, we must find the right time so that the entire society can reach a consensus.

The conflict between fairness and taxation. The levy of luxury tax will definitely increase the price of goods or consumer behavior, thereby achieving the purpose of fair taxation and safeguarding social justice. However, at the same time, taxation of luxury goods will also curb high-price consumption, which will have the effect of stimulating prices, and the government will receive less tax revenue. In other words, the more obvious the effect of luxury tax suppression on consumption is, the less beneficial to taxation is, and the lower the level of tax equity is achieved.

Measures and Suggestions on Levying Luxury Taxes

The tax rate on luxury goods should not be too high. The introduction of a luxury tax will most likely cause consumers to switch to consumption in neighboring countries or regions, but it will reduce local spending power, especially for lightweight products such as jewelry and designer handbags. Therefore, the tax rate for luxury goods should not be set too high.

The tax rate is determined by the type of product. The U.S. stipulates that a 10% luxury tax should be imposed on cars that cost more than 30,000 U.S. dollars, and Sweden's tax rate is 20% to 25%. National conditions are different, so the tax rate of luxury goods must be different because of different standards. Yachts, private jets, high-priced luxury homes, and luxury sports cars, which are subject to inconvenience or territoriality of transportation, cannot be purchased and used elsewhere. Higher tax rates can be applied, and low taxes should be applied to small jewellery and diamonds that are small and easy to carry. So as not to cause the phenomenon of consumption in other countries. The levy of luxury tax should follow the principle of “high price, wide tax base, and low tax rate”. It is better to use a single tax rate.

It is not suitable for implementation at present. With the current widening income gap, it is easy to gain social reliance on taxation of rich people. However, the shadow of the international financial crisis has not yet been completely eliminated and any tax increase measures should not be implemented. If the government implements it rashly, it may cause the result of “doing the right thing at the wrong time.”

Do not double taxation. Consumption tax has the obvious characteristics of taxation of luxury goods, and it reflects the policy guidance of guiding reasonable consumption and “forbidden to levy”. If luxury tax taxes are to be established, the part of the consumption tax that includes the meaning of luxury tax should also be removed. Otherwise, there will be a suspicion of double taxation.