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Potential-Consumption-Tax-Reforms-Could-Impact-Global-Luxury-Goods-Market

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Potential Consumption Tax Reforms Could Impact Global Luxury Goods Market

by Giezel Garcia
01/05/2025
in Luxury Goods

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Reports from local Chinese news sources indicate that the Chinese government is considering comprehensive reforms to the consumption tax system, a move that could have significant effects on the global luxury goods market.

China, a key player in global luxury consumption, accounts for approximately 30% of global sales. If these tax reforms are implemented, high-end goods may be among the first to be affected.

Experts, including Liu Rong, dean of the School of Finance and Taxation at Southwestern University of Finance and Economics, suggest that current taxes on luxury consumer goods may not be sufficient and could be adjusted in the reform process.

The potential changes may primarily target ‘hard luxury’ items such as watches and jewelry, which could face higher tax rates. However, certain niche luxury categories, including private jets, entertainment, and high-end furniture, may not fall under the scope of the new consumption tax.

Though details remain unclear, analysts at UBS have warned that, if these proposals are confirmed, the move could negatively impact luxury brands, particularly those focused on ‘hard luxury’ products like Swatch and Richemont. UBS further forecasts that increased consumption taxes could dampen domestic demand for luxury goods in China, shifting more purchases toward international markets.

Currently, luxury goods prices in China are already 20% higher than in other regions, according to UBS data. The proposed tax changes, if implemented, could exacerbate this price gap.

The Swatch Group, in particular, is expected to face significant challenges due to its considerable market exposure in China.

Your go-to source for supply chain logistics news updates: The Supply Chain Report. Enhance your international trade knowledge at ADAMftd.com.

#LuxuryTaxReform #GlobalTradePolicy #LuxuryGoodsMarket #ConsumptionTax #TradeRegulations #EconomicImpact #RetailIndustry

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