Although Chinese travellers must pay at least 20 percent more for duties on watches and cosmetics purchased from overseas markets, it is still much cheaper than buying them from local shops.

 

The Ministry of Finance announced on Tuesday that starting from the beginning of next year it will raise the tariff on individual travellers' purchases of luxury goods from overseas nations and regions. The tariff on golf clubs and relevant equipment and luxury watches will increase from the current 10 percent to 30 percent, and the cosmetics tariff will jump from 20 to 50 percent.

 

The new duty rates will also apply to such goods shipped from overseas.

 

Experts say the increased tariffs will not undermine local customers' desire to shop abroad, since those luxury goods are still cheaper in foreign markets than those sold in the domestic market, even after the imposition of the new duty rate.

 

"Mainlanders will still find it less expensive to fly to Hong Kong, stay in a five-star hotel and bring back a 20,000 yuan (US$2,564) watch than to buy it from a boutique in Beijing," said Liu Xingli, editor of Trendstime.

 

"Domestic prices, with the combination of tariff, value-added tax and consumption tax, are not as competitive as those in Hong Kong and foreign marketplaces."

 

Taking niche watch brand Breitling as an example, the average watch prices in Hong Kong only account for 70 percent mainland prices, according to Shirley Ng, marketing manager of Breitling's Hong Kong and Mainland Division.

 

Figures from the General Administration of Customs also indicate that there is a large tax and duty gap between local and overseas markets especially Hong Kong, where there is no tariff, and Europe, where foreign travellers enjoy a tax refund.

 

For instance, the general duty on mechanical watches made of precious metal is 80 percent, plus 17 percent value-added tax and 20 percent consumption tax, so the adjusted tariff on travellers' overseas purchase of 30 percent is still very low.

 

It is the same case for cosmetics. For eye beauty products, China imposes a general tariff as high as 150 percent, adding a 17 percent value-added tax and a 30 percent consumption tax, compared with the new 50 percent duty on travellers' overseas purchases.

 

Liu said it is not surprising to see the government raise tariffs on individual's overseas purchases after this April's consumption tax adjustment. China imposed a domestic consumption tax of 20 percent on luxury watches, and a tax of 10 percent on golf clubs and related equipment.

 

Such a policy has driven many local customers from domestic to foreign markets.

 

"The government wants to change this situation and stimulate domestic consumption," he said.

 

Liu predicted that such a tariff will be further increased, because in every country, taxes and tariffs on luxury goods are crucial tools to balance the rich and the poor.

 

Even without the price difference, people prefer to buy from abroad, said Yves Carcelle, Louis Vuitton's chairman and chief executive officer.

 

(China Daily December 28, 2006)