Another barrier to entry
If introduced, a proposed 'consumption tax', to be applied to the sale of luxury goods in mainland China has the potential to act as a further obstacle to the superyacht industry's sustained entry into the Chinese market. Chinese buyers are already subject to an importation tax that can sometimes double the vessel's price.…
According to the head of China’s Financial Science Institute government department, Jia Kang superyachts will be the subject of a ‘consumption tax’, which will charge a levy on luxury goods and products that harm the environment.
The tax, according to various media reports, will be applied to the sale of these products and not the manufacturing process. Presumably, as with most Chinese fiscal policies, this is a means of bolstering Chinese production and discouraging wealthy Chinese from purchasing foreign imports, and it would therefore, be a welcome introduction for the Chinese yachtbuilding sector. And this is agrees Raphael Beaudrey, business development manager for Rosemont Hong Kong, the driving force behind the decision:
"Consider it a protectionist decision in order to favour the local manufacturers - high import tax plus no import or trade of second-hand yachts over 12 months old - and I believe large Chinese groups acquiring foreign yacht manufacturers, with the transfer of technology, has also played a role in the decision." Beaudrey added that, in his eyes, it would take a plateauing sales market and a hegemonic Chinese yachtbuilding presence in the country to trigger a shift in policy.
Speaking to China Radio International, Shanghai-based associate principal of China Market Research, Benjamin Cavender claimed the tax could be introduced as early as October 2014.
Cavender said the estimated $160 billion in predicted revenues would be very welcome for under siege local governments. He did say however, “It will take a little while for them to know what [the taxable goods] are going to be”.
This uncertainty on what would fall under the remit of the new tax was something Alex Teji, senior associate at Hill Dickinson, reiterated when speaking to SuperyachtNews.com. “We’ve not heard any particulars on these new proposals just yet”, he explained. “At the moment total tax on the importation of a yacht can be as much as 43 per cent of the total purchase price – hence why Hong Kong continues to be the favoured choice.” And this is a view that Beaudrey concurred with, although he said that Hong Kong's lack of infrastructure meant it would, in reality, be neighbouring countries that cashed in. "For Hong Kong, in theory it should boost the number of superyachts parked here", he explained. "But in practice...Hong Kong lacks available berths and marina spaces. And the HK Marine Department is still entangled by the responsibilities highlighted in the report on the Lhama ferry accident two years ago. [So it is likely to] be more beneficial to other destinations such as Singapore, Phuket and Taiwan…"
Teji added that discouraging the trading of luxury goods in China was actually detrimental in the long run. “There needs to be political recognition on the economic benefits this could bring to the country,” he explained, “and to the region.”
In conversation with SuperyachtNews.com earlier this month, Pride’s director, Itay Simhony warned that “there is a bargain hunting approach here, where you always look to haggle and that’s how it works in China. Instead of inflating prices in anticipation of that, you need to coach them as to why a boat costs that much so they feel happy with the price that is being asked and understand that it is fair.”
The tax, according to various media reports, will be applied to the sale of these products and not the manufacturing process. Presumably, as with most Chinese fiscal policies, this is a means of bolstering Chinese production and discouraging wealthy Chinese from purchasing foreign imports, and it would therefore, be a welcome introduction for the Chinese yachtbuilding sector. And this is agrees Raphael Beaudrey, business development manager for Rosemont Hong Kong, the driving force behind the decision:
"Consider it a protectionist decision in order to favour the local manufacturers - high import tax plus no import or trade of second-hand yachts over 12 months old - and I believe large Chinese groups acquiring foreign yacht manufacturers, with the transfer of technology, has also played a role in the decision." Beaudrey added that, in his eyes, it would take a plateauing sales market and a hegemonic Chinese yachtbuilding presence in the country to trigger a shift in policy.
Speaking to China Radio International, Shanghai-based associate principal of China Market Research, Benjamin Cavender claimed the tax could be introduced as early as October 2014.
The sale of superyachts such as Feadship's Blue Sky would inevitably be hampered by a consumption tax.
Cavender said the estimated $160 billion in predicted revenues would be very welcome for under siege local governments. He did say however, “It will take a little while for them to know what [the taxable goods] are going to be”.
This uncertainty on what would fall under the remit of the new tax was something Alex Teji, senior associate at Hill Dickinson, reiterated when speaking to SuperyachtNews.com. “We’ve not heard any particulars on these new proposals just yet”, he explained. “At the moment total tax on the importation of a yacht can be as much as 43 per cent of the total purchase price – hence why Hong Kong continues to be the favoured choice.” And this is a view that Beaudrey concurred with, although he said that Hong Kong's lack of infrastructure meant it would, in reality, be neighbouring countries that cashed in. "For Hong Kong, in theory it should boost the number of superyachts parked here", he explained. "But in practice...Hong Kong lacks available berths and marina spaces. And the HK Marine Department is still entangled by the responsibilities highlighted in the report on the Lhama ferry accident two years ago. [So it is likely to] be more beneficial to other destinations such as Singapore, Phuket and Taiwan…"
Teji added that discouraging the trading of luxury goods in China was actually detrimental in the long run. “There needs to be political recognition on the economic benefits this could bring to the country,” he explained, “and to the region.”
Could crowds at Chinese yacht shows start to dwindle if a tax were imposed on sales?
The introduction of such a tax would be seen as something of a setback to the growth of the Chinese market, particularly in the wake of the coup that was the sale of 88.8m Illusion, currently under construction at Pride Mega Yachts. In conversation with SuperyachtNews.com earlier this month, Pride’s director, Itay Simhony warned that “there is a bargain hunting approach here, where you always look to haggle and that’s how it works in China. Instead of inflating prices in anticipation of that, you need to coach them as to why a boat costs that much so they feel happy with the price that is being asked and understand that it is fair.”
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