In recent years， Chinese automotive industry， as one of the pillar industries haskept on rising. In 2006， Chinese auto production ranked the third in the world.The governmental authorities are also studying the corresponding taxations toboost the healthy development of Chinese automotive industry

Mr. Shi Yaobin， Chief-Director of Taxation Department，the Ministry of Finance of P.R.C， gave a lecture on currenttaxation items in China's auto industry and released infor-mation on the next programs at 2007 IFCAID. With hissystematic and detailed illustration， the audience got the fullpicture for taxation policies of China's automotive industry，an important part of government micro-control.Current taxation items

The Chinese government encourages application of newenergy and technologies innovation to develop new energy，restrains the vehicle emission and pollution， and is takingeffective measures to promote energy-efficiency and envi-ronmental protection. Taxation items levied nowadays are inaccordance with this principle.

The current taxation items levied on the automobilesmainly include value added tax (VAT)， consumption tax，tariff， pur-chase taxand so on.VAT is aturnovertax leviedon allcommodi-ties andservicesfor pro-cessing，repairingand maintenance， with a tax rate of 17%.

At present， consumption tax for the heavy andmedium commercial vehicles is not levied， and forlight commercial vehicles is 5%， for passenger carsranges from 3% to 20%. Compared with the formerhighest rate 8%， the big raise of the consumption taxaimed to restrain the purchase of large-displacementcars so as to protect environment and reduce fuel con-sumption.

Vehicle purchase tax is for both private users andofficial users of any kind of motor vehicles， with a rateof 10%. The revenue is used for the construction ofnational and provincial roads.

On January 1， 2007， the new Provisional Rulesfor the Vehicle and Ship Tax was issued， combiningthe former license tax and usage tax for vehicles andships， with the highest limit of RMB 660 yuan eachyear. While the weighted average taxes for large， me-dium and light buses are doubled.New auto trends

With the popularity of motor vehicles in China.the pollutants from motor vehicles are also rising. In2004， the exhaust of hydrocarbon was 8.36 milliontons， that of CO was 36.40 million tons， and that ofNOx was 5.49 million tons. In 2006， the productionand sales of motor vehicles in China both surpassedthe number of motor vehicles in use， reaching 49.85million units， including 13.99 million three-wheelvehicles and low-speed trucks， a rise of 15.2% over2005. As a result， the pollutants from motor vehiclesalso increased greatly.

The increase of vehicle population gives rise tothe stronger demand for fuel and energy. In 2005， theconsumption of gasoline by motor vehicles in Chinaaccounted for 86% of the country's total gasoline out-put， and that of diesel was 24%. China has been moreand more dependent on imported oil， with 45% oftotal consumption imported in 2006， second only tothe United States. Energy efficiency and security hasbecome sharply important.

Energy-saving and reduction of exhaust of pol-lutants are the key tasks for the development of au-tomotive industry. In 2006， the Chinese governmentexerted more efforts to promote the energy-savingand reduction of exhaust of pollutants， and issuedcorresponding policies and measures. For automotiveindustry， the RD of technologies on energy-savingand environmental protection and the launch of cor-responding products are necessary and crucial.Initial program on auto taxation policy

In accordance with the instructions of the StateCouncil， the initial program on reforming and im-provement of auto taxation policies shall stress on thefollowing four aspects.

Firstly， put forth preferential taxation policies topromote the development of low fuel-consumptionand environmem-friendly vehicles， following whichthe similar and supporting policies for clean fuels willbe also in-troduced.

Andthen， issuethe taxationpolicies todiscour-age theproductionof vehicleswith lowenergy-efficiency. The formulation of the policies on levy-ing punitive taxes on the high fuel-consumptionvehicles will be speeded up in accordance with thenational mandatory standard Limit for the FuelConsumption of Motor Vehicles.

Moreover， fuel taxation program will be im-proved and put into practice at proper time. It is afurther step of the general principle of the reformon road transportation taxes.

Finally， environment tax is on the way to belevied in order to restrain the production of vehicleswith high emission. The study on the possibility oflevying environment tax will be speeded up whileintroducing foreign experiences and examples.