2020 May 22, Hangzhou, China. Li Shufu, the Chairman of Geely Holding Group, has called for automotive tax reforms and the removal of motorcycle bans in cities across China in submissions to the annual meetings of the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) – known as the Two-Sessions meetings.
Li submitted the proposed reforms in his capacity as an independent non-party affiliated representative for the Zhejiang Provincial Committee, where Geely is based, having been elected to the 13th National People’s Congress running from 2018 to 2023.
Attending the meetings in Beijing, where proposals for new legislation or proposed reforms are discussed, Li submitted the following suggestions:
The current tax system for the automotive industry has resulted in a divergence of interests between central and local governments. Automobile consumption tax and purchase tax are both centralized taxes and while the central government seeks to boost automobile sales and consumption with tax incentives, local governments ultimately carry the increased costs of traffic congestion and road maintenance in addition with having to invest more in automotive focused infrastructure such as parking lots and charging stations.
Li Shufu proposes that a more equitable distribution of automobile tax revenue between national and local government organisations would incentivize local governments to support national policies and provide funds to invest in infrastructure. Based on current tax revenue generated from automotive sales, local governments could see more than 170 billion RMB in additional income under the proposed 50:50 tax revenue sharing system.
This proposed reform, which has been supported by other major automotive manufacturers in China, would free up working capital from vehicle manufacturers for greater investment in R&D efforts and technology development without changing the final costs to users or government tax revenue. Current consumption tax policy requires advance payment by manufacturers reducing the amount of working capital available to enterprises for further technological innovation and product development. At the same time, the automobile consumption tax is currently a centralized tax and benefit to local governments is minimal, further disincentivizing local governments from supporting national policies.
Currently, China is the only country in the world which has taken a blanket approach to banning motorcycles in urban areas. At its peak, China’s motorcycle production and sales once reached 55% of the world’s total. However, due to the prohibition of motorcycles which was introduced into over 190 cities across the country, as a result the motorcycle market has shrunk, depriving enterprises of their momentum for further development, stalling technological progression, and weakening competitiveness.
In the reform proposal, the Geely Chairman noted that motorcycles also have a much high traffic efficiency and consume fewer resources when compared to larger passenger vehicles. A study by the European Motorcycle Association has found that a 10% increase in motorcycle traffic can reduce urban traffic congestion by up to 40%. A single motorcycle on the road is one less car on the road, alleviating fuel consumption, traffic, parking spaces, and people’s restriction to mobility. In major European cities such as London, Paris, Milan, Geneva, local governments have taken measures to incorporate and support the development of motorcycles into a diversified transportation system improving the flow of traffic.
Giving a statement on the opening day of the Two Sessions meetings, Li Shufu said “As we heard from the government’s work report, this year’s meeting will focus on protecting employment and people’s livelihood. To do so, we must stabilize enterprises to maintain employment, we must stabilize hundreds of millions of market players. The report proposes pragmatic measures such as tax cuts and fee reductions, promoting the reduction of production and operating costs, and strengthening financial support to stabilize enterprises. The greater the difficulties and challenges, the deeper the reform.”
Li’s proposals will be discussed during the Two Sessions from May 22nd to May 29th by cross-party delegates and voted on before becoming legislation. Li has previously received strong support for recommending measures to close loopholes and grey areas in tax legislation, as well as securing support for the adoption of methanol vehicles in China’s fuel-supply system.