China is considering a new tax law which would encourage consumers to use vehicles with smaller, more fuel-efficient engines.

On Monday (25th October), the draft legislation, which was passed by the State Council earlier this month, was reviewed for the first time by the National People's Congress Standing Committee.

Under the proposals, taxes on vehicles with engines smaller than 1.6 litres will be cut slightly or remain unchanged.

But models with an engine capacity between 1.6 and 2.5 litres will be given a "moderate" increase, while a "relatively large" rise will be imposed on vehicles with engines larger than 2.5 litres.

"The larger engine capacity a car has, the more tax the owner will pay, therefore the law will be effective in improving energy efficiency and cutting emissions," Chen Shaoqiang, of the Research Institute for Fiscal Science at the country's ministry of finance, told China Daily.

Reports suggest that the new laws could be in place by next spring, but auto industry experts have claimed that they may increase costs for drivers rather than help to cut emissions.

Independent analyst Zhong Shi noted that the government unsuccessfully attempted to reduce sales of vehicles with large engines in 2008 by increasing consumption taxes.

"It's not an effective weapon to limit the sales of vehicles with large engine capacity, as buyers of these vehicles often do not care about prices or taxes," he told the news provider.

"They (the policymakers) should realise that the use of fuel, not the capacity of the engine, is key to energy consumption."

China is the world's largest auto market, having surpassed the US in terms of annual sales volumes last year.

Sources:



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