Since Chin a’ s reform and opening up, China’s economic level has improved significantly and obtained a fast steady development ; residents ’ disposable income has increased rapidly. Based on the economic growth, the rich people quickly emerge and ha ve a strong desire for luxury consumption. But at the same time, the outflow of luxury goods’ consumption in China is serious. After entering into the “new normal”, China has become the country which obtained the largest luxury goods consumption in the world . It also bec o me s the largest overseas luxury goods consumption in the world. At present, China’s luxury goods market in the “New Normal” faces a great deal of opportunities and challenges. Luxury goods consumption in China show s a blind heat and consumption drain, which ha ve adversely affected the economic development of our country. For instance, the wealth gap is widening, revenue is reducing, social equality is missing and domestic demand is insufficient etc. These issues have become the great problem which is perplexing Chinese and causing widespread public concern. It is urgent to take measures to curb the rise and outflow of consumption. Among them, the tax adjustment on the import of luxury goods is the most important one. As the government’s macro-control policies, adjusting tariff and consumption tax of luxury can lead a right way to develop the luxury goods market. Many domestic and foreign scholars have got in-depth analysis about these issues from the perspective of tax policy. These discussions help the growth of local luxury goods industry and the reasonable formulation about luxury tax policies in China. This paper focuses on summarizing the research literature on importing tax policy of China ’ s luxury goods. It has a very important theoretical and practical significance.
To study what influence the import tax policy might have on domestic consumption of luxury goods and what effects of raising or lowering import taxes rates on economy, we need to study the definition of luxury goods firstly. Therefore, it is necessary to comprehensively explore the economic connotation of luxury goods. For a long time the academics’ decisions about how to define luxury are not conclusive. Although scholars at different subject areas give different definitions of luxury goods in different historical periods, the definition discussion still provides great help for our present and future research.
As early as 2000, the vast majority of Chinese had not yet formed the concept of luxury consumption, and China accounted for only about 1% [
However, while China’s luxury goods consumption is rising, the consumption outflow is serious. The total domestic consumption and growth rate of China’s luxury goods is far lower than the total overseas consumption. According to Bain & Company, in 2008, the overseas consumption of luxury goods in China was 80.8 billion yuan, 1.3 times as much as domestic consumption; by 2017 [
As can be seen from the
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It is urgent to take measures to control the outflow and guide the consumption of luxury goods backflow.
To study what influence the import tax policy might have on domestic consumption of luxury goods and what effects of raising or lowering import taxes rates on economy, we need to study the definition of luxury goods firstly. Therefore, it is necessary to comprehensively explore the economic connotation of luxury goods. For a long time the academics’ decisions about how to define luxury are not conclusive. Although scholars at different subject areas give different definitions of luxury goods in different historical periods, the definition discussion still provides great help for our present and future research [
“Luxury” derives from the Latin “Luxuso” (Luxus), which means “extremely strong fecundity” [
Academic research for luxury conception began in 1776 when Adam Smith’s the wealth of nations came out [
Greater China chief representative of the world luxury association Kun Ouyang [
This paper use the broad definition of luxury from Zhu Mingxia [
The development of the industry is based on the development of the enterprise, while the development of enterprise is based on the consumers’ demand. The understanding of the consumers’ behavior is the result of the deep understanding of their consumption motivation.
Foreign scholars’ study on the motive of luxury consumption behavior began in the late 19th century. This study has been developing for over a hundred years, and has formed a relatively complete research framework. At present, the literature mainly studies are made from two aspects: individual-oriented motivation and social-oriented motivation and has obtained abundant research conclusions.
Veblen [
Domestic academic researched on the consumption of luxury goods started late, and there are great differences in the opinion and way of luxury consumption at home and abroad.
From the perspective of individual self-enhancement and self-verification, it is found that vanity is very significant in the purchasing motivation for Chinese consumers. Representative scholars: Guo Peijun, Su Yong [
From the perspective of the consumer group, it is found that the difference of status and gender has an influence on the behavior of Chinn’s luxury consumers. Zhu Xiaohui [
Study the white-collar class concretely, Zhang Maohua [
Specify the study of gender and income difference: Zhu Xiaohui [
According to the literature analysis at home and abroad, We find that foreign luxury consumption emphasis more on income and personal factors, such as self-oriented motivation while domestic luxury consumption tend to chase vanity, status and face, to show off, as well as to socialize, these can be sum up as social oriented motivation factors. The domestic luxury market needs further guidance and standardization.
Foreign scholars Radha Chadha and Paul Husband [
Ma Longlong and Liu Chang [
Shi Binghua (2012) [
・ Rapid economic growth. Pei Changhong [
・ Special population structure. The consumption desire is released under the special population structure. The rise of the rich has led to family planning in China. The “only generation” created by the policy has become a special consumer group. They have released the whole family’s consumption ability. This has undoubtedly promoted the expansion of the production and purchase of luxury goods by the huge population of Chinese luxury consumers.
・ The promotion of “conspicuous consumption”. Although there is a certain economic foundation of support, but the ability to consume does not have the desire to consume. Apparently, there is no such problem among Chinese luxury consumers. As early as one hundred years ago, Bollen (Thorstein Veble), an American economist who reveals the Consumption habits of the “first generation in the United States” in a book, in this book, “Conspicuous Consumption” have been proposed for the first time. While the rich accumulate their wealth, they gain social recognition and respect by purchasing luxuries and using them. Similarly, in nearly a decade, China has emerged a large number of rich people and thus gave birth to the first generation of the rich in China, they are writing their struggles at the same time, and hoped to get the social recognition and respect. So they chose to reward themselves when they had made some achievements, the “conspicuous consumption” timely push the rich people to buy appearance elegant, exquisite and different styles of products, more importantly, significant brand logo are printed on luxury products which can let people learned that users have a lot of wealth, can reflect the identity and status of users. It is a luxury consumers desire that blowing balloons in China’s favor “weapons”.
Therefore, the thermal expansion in China’s luxury goods market is mainly due to the development of China’s economy, the improvement of people’s income level and the change of consumption concept. In addition, based on the summary of luxury consumption motivation in the previous section, we can see that, with the continuous growth of domestic economic level, the thermal expansion in the luxury goods market is closely related to the consumer motivation of the consumer group, which is supported by the macro-economic basis. A variety of vanity, flaunting, and social, status, career and face demand motivation of Chinese consumers have unleashed more and more purchasing power. There is no doubt that such a large population of Chinese luxury consumers has pushed the scale of luxury goods to expand.
From three aspects of demand, supply and price, Ma Longlong and Liu Chang (2013) [
From the point of view of classical marketing, Zhao Lan [
According to the issue of “The official report of the blue book on the world luxury goods in 2011” by World luxury Association, “China’s luxury market tax rates are the highest in the world”. The highest luxury tax rate in the world caused price difference, which undoubtedly boosted the massive outflow of luxury consumption in China.
McKinsey consulting company [
Therefore, the main reasons for the outflow of luxury consumption in China are the persistence of price difference at home and abroad, the continued strength of RMB, the good experience of overseas shopping and the feelings of origin of luxury brands.
In view of the thermal expansion and outflow of luxury consumption in China and its many adverse effects, many scholars advocate to increase the regulation of luxury goods market through luxury tax policy. For example, in 2006, the Ministry of Finance and the State Administration of Taxation expanded the scope of the luxury goods consumption tax to curb the thermal expansion, in 2011, the Ministry of Commerce repeatedly proposed to reduce luxury goods import tariffs to prevent outflow. The tax regulation of luxury consumption has become the focus of academic debate.
Huang Youguang [
Zhang Bin [
However, from the perspective of economics, Wen Yuan (2007) [
So the idea of expanding the tax base on luxury goods and adopting comprehensive tax governance has re-emerged, for example, Li Daming, Wang Meng [
Some other scholars believed that increasing the levy of luxury goods consumption tax will not solve the problem of thermal expansion.
From the perspective of economic theory of partial equilibrium and general equilibrium, Deng Min, Li Dongkun [
When it comes to a certain kind of luxury goods, from the perspective of consumer behavior, Kong Shuhong (Wang Fuzhuang) [
Wang Xin (2008) [
In summary, we can see that the discussion on whether the luxury consumption tax should rise or fall is mainly focused on the analysis of the income distribution effect of the luxury consumption tax and whether it can reduce the overall tax burden while curbing the overheating of consumption. Promoting the realization of income equity and narrowing the gap between the rich and the poor.
There are two opposing viewpoints in domestic researches on the adjustment of luxury goods tariffs. The first is the viewpoint of the “tax-lowering school”, which is mainly represented by the Ministry of Commerce, who believe that the luxury duty should be lowered. Specific reasons include:
・ The high tariff rate of luxury goods will lead to huge price difference at home and abroad, which will cause the outflow of luxury goods consumption, and cause the loss of domestic tax revenue, it is not conducive to the increase of financial income.
・ The outflow of luxury goods caused by high tariffs is not conducive to the expansion of domestic demand, and further affects the total domestic social demand and domestic economic growth, which is not conducive to the development of local luxury industries.
・ Although it is said that the reduction of tariff increases the sales volume of imported luxury, which is not necessarily related to domestic demand, it will produce the corresponding commercial added value, which is calculated in the GDP of our country. Therefore, reducing tariffs can achieve the purpose of expanding consumption and increasing employment in circulation links. At the same time, it can also reduce China’s trade surplus and foreign exchange, improve trade balance and curb inflation.
The following scholars hold the view above: Zhao Ping, deputy director of the consumer economy department of the trade research institute of the ministry of commerce, and Yuan Yue, chairman of the zero point research consultancy group, Liu Haifei, director of the China business economic research center.
The second is the view of the “non-tax reducers”, mainly represented by the Ministry of Finance, who do not consider it appropriate to lower luxury tariffs for reasons such as:
・ Tariffs are not the main reason for the high domestic prices of luxury goods, as they account for only a small part of the market prices of luxury goods (About 4%), in addition to customs duties, there is also a value added tax (About 17%) and consumption taxes, and other additional charges (Such as dealer costs, commercial real estate rents, etc.). Compared with the regulation tariff, it is preferable to further deepen the VAT reform and appropriately reduce the VAT rate of the relevant commodities. Besides, overseas tourists’ shopping needs to be paid at customs (more than 5000 yuan). Wu Yabin, Malone dragon and Liu Chang are the typical representatives of this view.
・ Foreign shopping also has factors beyond price differences, such as misalignment of sales cycles at home and abroad, blind pursuit by consumers in developing countries of brands and fashion in developed countries, product quality, shopping experience, brand complex, and so on. So just lowering tariffs does not necessarily attract the return of luxury consumption.
・ There is no necessary link between lowering tariffs on luxury goods and expanding domestic demand, because the so-called expansion of domestic demand is essentially directed at domestic products, not imports. At present, the luxury goods in the Chinese market are basically controlled by foreign manufacturers. Therefore, lowering tariffs and expanding consumer demand for imported products will not only be detrimental to expanding domestic demand, but it will even damage the competitiveness of domestic enterprises in the domestic market. Liu Shangxi, who worked in the Scientific Research Institute of the Ministry of Finance is a typical representative of this view.
・ If the existence of high tariffs on luxury goods leads to high domestic prices of luxury goods, then whether from the perspective of macroeconomic stability or long-term national economic development, this price difference actually reflects our country’s success in macroeconomic stability and long-term development. Because by setting up import trade barriers such as tariffs, inspection and quarantine, exchange rates, and so on, not only to curb domestic residents’ consumption of imported luxury goods to a certain extent, It can also enable foreign capital industries to compete with domestic national industries under relatively fair conditions, leaving domestic national industries with room for survival and “base areas” on which to start, so that national industries can start from lower grade products and gradually grow stronger. Finally it can compete with the western enterprise and the western brand.
Although the official Ministry of Finance has not made it clear that it does not support a cut in luxury goods tariffs, its performance in lowering tariffs has led most scholars to believe that it is opposed to a cut in luxury tariffs.
A tit for tat debate about luxury goods and tariffs has also attracted some scholars to carry out empirical research on the tax collection of luxury goods import links, such as Deng Min and Li Dongkun (2012) [
Under the trend of luxury goods price index and the quantity index, Guo Hongbao, Lun Yujun (2012) [
Through the empirical study, Guo Peijun and Su Yong (2004) [
From the perspective of international trade, Shi Binghua [
To sum up, the reasons for the thermal expansion and outflow of consumption in China’s luxury goods market have been comprehensively analyzed. Although scholars have different approaches to regulating the luxury goods market in China and curbing the thermal expansion and outflow of luxury consumption, but they all focus on tax measures. The analysis of the various economic effects of the tax measures of tariff and consumption tax on luxury consumption behavior is helpful to put forward comprehensive measures for the healthy development of luxury consumption in China.
According to the classification of international tax range, Zhang Mengcai and Wang Fuzhuang [
Li Xiangju and Zhao Na (2015) [
Li Daming and Wang Meng (2009) [
Li Daming and Wang Meng (2009) [
Meng Xianwei and Wang Jun [
With the improvement of the consumption level of Chinese Residents, Li Xiangju, Zhao Na [
Ma Longlong, Liu Chang [
Zhao Lan [
In the aspect of strengthening the luxury tax collection, Meng Xianwei, Wang Jun (2016) [
On the strategy of tax adjustment, Ma Longlong and Liu Chang (2013) [
1) We can adjust the collection of single tax or tax combination directly;
2) Through the domestic duty-free shops, bonded zone retail and other innovative ways to create “in-and-outside” emerging consumption patterns, to achieve the indirect regulation of the tax system.
In addition, there are also some suggestions to guide luxury consumption reflow by setting up tax free channels for luxury goods, adding airport duty-free shops, tax-free zones, implementing shopping rebates and other measures.
In recent years, China’s luxury market has developed rapidly and has become the largest luxury market in the world. But throughout the international luxury market, most of the top luxury brands are from Europe, the United States and Japan. China’s local luxury brands are difficult to establish in the international market. We must draw lessons from mature luxury goods markets such as Europe and the United States, formulate tax strategies that meet the characteristics of products and market demands, and carefully choose the scope of taxation and tax rates in light of the characteristics of blind expansion and outflow in luxury goods consumption in China. And with a reasonable model of valorem tax, the specific tax should play its due role in regulating consumption, promoting economic development, improving income distribution and other economic functions. The great potential of local luxury brands in China should be full played, and then the Chinese luxury goods market to the international stage needs acceleration.
The strong momentum of luxury consumption has led all sectors of society to pay attention to the consumption of luxury goods, and the most important research direction is the tax system for the problem of the hot rise and outflow of luxury goods. Based on the reference and summarization of the research on luxury goods, this paper summarizes the definition of luxury goods and the motive of luxury consumption. This paper summarizes the characteristics of the status quo of the luxury market and the reasons behind it, and summarizes the tax policy Suggestions.
But this article also has some limitations, first of all, for how to draw a tax system reform methods and measures, this article can’t reach the whole complex system, because of the tax system reform is a profound and complex systems engineering, the authority has no official clear definition on luxury goods, the government has not yet been formulated specifically luxury tax system; Secondly, the existing literatures mainly focuses on the theoretical analysis of luxury goods. In the empirical part, due to the lack of clear and effective tax data, there are few existing researches. In the analysis of the quantitative index of luxury goods, how to rationally stratify the domestic luxury goods and make data statistics need to explore more scientific and reasonable indicators in the future research.
Upon the completion of this thesis, I would like to express my hearty appreciation to all those who have granted me invaluable help.
Sun, D.Y. (2018) Literature Review on Importing Tax Policy of China’s Luxury Goods. Modern Economy, 9, 510-527. https://doi.org/10.4236/me.2018.93033