Private jet companies believe new taxes would keep the industry from taking off in China. (AsiaJet)
As little as eight years ago, private aviation was hardly heard of in China, due to controlled airspace and strict requirements for clearance. Today, China’s private and business aviation scene is still small compared to other countries, but with clients paying more per plane, China has been catapulted into one of the top five markets in the world. With easing regulations over airspace, China’s private jet scene seemed poised to take off. But recently, the Chinese government announced that it might impose a consumption tax on top of value-added tax and import duties onto the sale of private jets, and the industry cried foul.
As reported by china.com.cn, China’s Ministry of Finance announced on April 4 at the General Aviation and Media Communication Forum that private and business jets may be taxed as “luxury,” referring to a composite of import tariffs, value-added tax, and a consumption tax that varies based on the product. Luxury taxes may add up to an additional 50 percent of the original price of the product. Currently, private jets face a 5 percent import tariff and 17 percent value-added tax, but have no consumption tax. Industry insiders worry that if the government imposes a consumption tax, it would dismantle and destroy China’s fledgling private aviation scene that has only begun to take off in the recent years. According to the article:
“While private jets can be considered a sort of luxury, in reality it is still a very normal means of transportation. Just as you can’t label all cars as luxury—certainly cars like Lamborghini and Ferrari are luxury—but business jets are for the most part ‘time machines’ that save a lot of time and money,” says deputy general manager Jiao Jian of business jet company Deer Jet. Jiao adds that if commercial jets can be considered public transportation, then business jets should be seen as “rental cars.”
Director of China Air Transport Association’s navigation committee Wang Xia told china.com.cn that the average layman and Ministry of Finance have a rudimentary understanding of the nature of business jets, and do not understand that business jets aren’t a “show of wealth” like luxury goods. Wang said that the imposition of luxury tax on business jets will undo the “hard-earned” progress of China’s private aviation industry, which has just started to take off.
China previously stringent rules on private pilot licenses meant that those who did pass the exams usually ended up flying military or commercial planes. According to China Daily, until November of last year, pilot students had to have a perfect bill of health. "After the changes, the physical requirements for private pilot's license holders have become as flexible as those for drivers," the Civil Aviation Administration of China said in a statement. China Daily reports that China’s private and business jet sellers anticipate an increase in sales, as more pilots are available for private aviation.