Home > China, Microeconomics, Tax Policy > Will a Luxury Tax Help China’s Poor?

Will a Luxury Tax Help China’s Poor?


There are plenty of good things to point out about the tax reforms announced by China’s cabinet, but I’d like my students to consider these questions:

  • What is the likely effect of the decision to levy “a number of luxury taxes”?
  • What substitutes do China’s richest consumers have for the kinds of things the government can levy luxury taxes on?
  • Why are initial tax revenues from these taxes likely to mislead officials into thinking they will be as effective in raising future revenue?
  1. Jeffrey Laryea
    February 12, 2013 at 10:44 am

    If the entire purpose of this is to generate revenue, then I think it’s an epic fail. I think luxuries are some of the most elastic “commodities” in the world and as such taxing them would just decrease its demand. However, I think this would be useful in the sense that it minimizes non-essential, extravagant spending and can possibly free up more money for investments and expansion. Then again the richest people could easily relocate and the country could end up losing a chunk of wealth through that.

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