Batteries and paint are subjected to the tax and the major point of consumption tax reform

Batteries and paint are subjected to the tax, procedures including manufacturing, authorized re-produce and import will be levied, tax rate is 4%, according to a statement by the Ministry of Finance and State Taxation Administration.

It is said that batteries used in China include original battery (unable to be charged), battery(able to be charged and reuse), fuel battery, solar battery and others. According to the regulation, some of them are free of charging tax. Consumption tax on battery was been put off in 31th Dec. 2015, and the tax rat reaches 4% since 1th Jan. 2016. The notice also confirms that VOC of paint is below 420g per kilometer will be free of charging consumption tax.   

Consumption tax policy adjustment is another expand against consumption tax levy range soon after lifting up oil consumption tax. Consumption tax has been drew much attention as it closely related to social life all the time, policy adjustment is eye-catching with public opinion each time. What is the basic thought about consumption reformation since then? Which kinds of objects will be in the range of levy? Or which will be excluded from be charged? In the reforming process of finance and taxation system, what problems should be paid attention? Writer of this article interviews specialist of finance and tax.

Energy saving and environmental protection are the major point of consumption tax reform.

Consumption tax is changing in order to adjust consumption against special consuming products. Incoming of consumers can be adjusted by levying tax on luxury products or luxury behavior, thus high-incomer bears more tax. Taxing on products and consuming behavior that are high-polluted or high energy consumption could guide consumers to consume less in these kinds. The head of Ministry of finance said that completing institution of consumption tax has regulatory effect on high-energy consuming, high-polluted products and part of luxury products; further enhance adjust function through adjusting levy range, optimizing structure of tax rate, improving levying stage. And the tax range expanding this time is an important step for consumption tax reform towards to energy saving and environmental protection.


Mr. Shi, the famous Jurist of Finance and taxation, the head of Center for Research in Fiscal and Tax Law of CUPL, said in an interview that the basic thought of tax reform is to leverage adjustment function of consumption tax, and it is a major trend. The center of its adjustment function is to promote energy saving and environmental protection. Resource shortage, environment pollution and ecological pressure are especially serious so far, which should be solved by certain measures in the development of economy and society.   

There is no doubt that consumption tax had other functions, such as regulating and guiding consumption, this is the reason that we increase tax rate of some high consumption behavior. Consumption tax of vehicle can be levied by amount of emission, the bigger the amount, the higher the tax. Refined oil and high-class tobacco and liquor should be regulated accordingly. As to the consumption tax of high-end consumer goods, its range is not going to be expanded and tax rate will not be increased in the future, like personal aircraft or yacht, whose number is limited, maybe the taxing range will be expanded but not that desperate. At the same time, regulation on high-end consumer goods not only relays on consumption tax, but also income tax. Consumption tax has a certain function in the aspect of adjusting income, but fundamental function can not be leveraged, income tax, property tax and real estate tax should play important parts, also the estate tax coming out in the future.

Mr. Shi introduced that high consumption rate leads to consumption outflow. Large amount of luxury products are consumed abroad, and it is not good for levying tax if rate is too high. We are in the pattern full of international taxing competition, in the background of opening-up, other countries is lowering tax rate. We can not increase tax rate in order to guarantee the source of tax base, talented person, technology and capital. On the other hand, with the development of replacing business tax with value-added tax, consumption tax will be as shared tax of the national and local area. The part belongs to local tax plays an important role and even become the main tax income in local financial income.

Consumer goods need to be levied tax can be divided into three categories, one of them is those that breaks ecological environment and consuming natural resources, such as motor vehicle, refined oil, wood-made chopsticks and so on., the second goods is those not healthy for mankind after being excessive consumed, such as tobacco and liquor, the third are luxury goods consumed by high-income group, such as golf and golf equipment, yacht and luxury watch.

Mr. Shi also indicates about the adjustment of range of consumption tax that concrete revenue policy has been brought out in the third plenary of 18thcouncil meeting , expanding range of tax , put high-polluted , high-energy , high-end goods, luxury goods into the range. Regular battery and paints have an bad affection for environment in the process of manufacturing.

Those do not belong to above category will be canceled in the current range of taxing. Such as consumption tax of tire has been canceled since tax of refined oil increases. Cosmetic products maybe will not be levied tax as it is the basic groceries. With the rise of consuming level, we already have entered in the normal consuming area and the consuming behaviors do not need be adjusted. The reform of consumption tax includes increasing and decreasing of categories and tax rate. Increasing tax rate if it belongs to adjustment target, otherwise, lowering the tax rate.

When comes to the procedure of levying tax, Mr. Shi holds the idea that consumption tax of sometaxation items will be levied before or after the stage of manufacturing or selling. Such as refined oil, its tax is been levied in the stage of selling. Consume demands are attracted if public service is well-done, then the consumption tax income will be high accordingly. Levying tax in the procedure of manufacturing means that the more factories, the higher taxing income. Taxpayer is relatively concentrated, consumption tax is levied in the stage of manufacturing or exporting, which is conducive to the origin management of revenue. Selecting this kind of mode gives better guidance for transformation of economy developing methods, elevates quality of public service and makes improvement in livelihood. 

Mr. Shi also said we should pay attention to the lawful process of taxing beside the adjustment of taxing policy. The construction of complete and reasonable mechanism makes taxing policy stable by protection of law, specific levying tax procedure, taxing range and taxing rate can be divided, it is necessary trend for reform of fiscal and tax system, whose success facts could be abroad, we need to make more efforts in sticking into the principle of taxation management by law, and tax levied by law.


Some issues still exist when government levies tax by law, at least the procedure of declaring taxing policy. The socialist state and legal systems with Chinese characteristics enjoy the advantages of the Party's leadership, the running of the country by the people, law-based governance in all fields and democratic centralism. In the background, taxing policy need to be regulated, reformed and completed, taxation items should be governed by law rather than rules. The way of issuing tax policy is approved by state council now, and issued by financial department and revenue bureau by the form of notice. Notice is only regulated file by ministry committee, it is not law. With the practice of lawful principle, consumption tax should be legislated. Policy adjustment can only realized by legislation such as taxing items and taxing rate.


We need to obey rules of authorization when issuing tax policy under the circumstances.

First of all, formal regulations are authorized by the National People's Congress, and then promulgated by the State Council, rather than issued by the Ministry of Finance and the State Administration of Taxation. In cases where legislation is currently unavailable, the first step can be to this extent. As the consumption tax legislation progresses in the future, it is also necessary to speed up this process in order to strive to bring all tax regulations into law by 2020.

“Judging from the legislative process, no matter the legislation of the Ministry of Finance, the State Council, or the People's Congress, it must go through the steps of "scientific legislation, democratic legislation, and door-opening legislation." These major tax policy adjustments, such as tax rate and tax reform, require public participation, and some drafts should also be published in advance for expert demonstration. The Fourth Plenary Session of the Eighteenth Central Committee proposed that "Major administrative decisions must be performed in accordance with statutory procedures, public participation, expert demonstration, risk assessment, legality review, and active discussion and determination. And like "the last few adjustments to the refined oil consumption tax, the decisions of the Fourth Plenum have not been well implemented. Public participation, expert discussions, legitimacy review, and risk assessment are all missing." He said.

To implement these normative procedures, experts and the public must be involved, hold a symposium, publish a draft, discuss for a period of time, and then decide whether or how to adjust, and summarize the opinions of all parties for consideration. After such a process, the introduction of policies may be slower, but it will better reflect public opinion and reflect public opinions; policies will also be more scientific, easier to implement, more easily recognized by the public, and incentives for wrong decisions will be smaller.

The reform of China's fiscal and taxation system requires efforts in these areas. At the same time, this is also a requirement for the modernization and legalization of taxation governance and the improvement of the level of taxation governance for the entire country.

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