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Consumption tax for Chinese LAB makers

Wed, 04/17/2013 - 18:36 -- Ruth Williams

China’s central government has proposed a new tax on lead-acid battery consumption that manufacturers fear will damage the industry.

Battery makers are calling on central government to delay or reconsider the proposed 5% tax on lead-acid battery consumption, which is proposed as an environmental measure to promote the awareness of protecting resources and the environment.

“We hope the government will hold off on the tax until battery makers are on track for healthy development,” Zhou Zhaoxue, Director of Chilwee Chuangyuan Industrial Co. Ltd., said at the 2013 Shanghai Lead and Zinc Summit.

The state’s Ministry of Finance and the Budget Committee of the Standing Committee of the National People's Congress has finished soliciting suggestions and opinions for the plan, but has not announced when the tax will come into play.

“If the government imposes the tax, it will force battery makers to further compress their costs. Producers have been selling batteries at cost, or even below cost, since October last year,” Zhou said.

The consumption tax will not only affect batteries. It targets products with high resource consumption that cause pollution or environmental damage, as well as some high-end consumer goods. At present 14 commodities including cars, cigarettes, alcohol, cosmetics and some jewelry are subject to the tax.

Introduction of the tax will negatively impact Chinese exporters. It is feared they will lose out to other Southeast Asian manufacturers not affected by high tax levels and could lead to manufacturing relocating outside of China. No time frame has been given for the proposed structural tax reform.