Chinese official calls for reduced taxes on wine

A top official from China’s Ningxia wine region has called for the gradual reduction of VAT on wine, amid local and central government’s push to turn the northwestern province into a world class wine producing region.

Cui Bo, left, head of Ningxia’s CPPCC, with dbHK‘s Natalie Wang in Ningxia

Cui Bo, chairman of Ningxia autonomous region’s CPPCC (The Chinese People’s Political Consultative Conference), made the remarks during China’s Two Sessions last month. He reiterated Ningxia government’s drive to grow the local wine industry when meeting with a Hong Kong delegation to Ningxia last week, led by Hong Kong’s former chief executive Leung Chun Ying and current vice chairman of China’s national CPPCC, a powerful political advisory body.

Speaking to dbHK in Ningxia, Cui affirmed his position on the taxes, and called for removal of 10% consumer tax and further reducing the 16% VAT tax on wine – which at the moment is taxed as an industrial product instead of agricultural product – in order to promote domestic wine production and consumption.

“We found that wines in most European countries and the US are taxed as agricultural product, but at the moment in our country it’s taxed as an alcoholic beverage under the industrial product category,” he explains, resulting in tax differences.

The high taxes on domestic wines in general, combined with high production costs, including vine burying during winter times and drip irrigation in drought-ridden Ningxia, further pushed up prices for Ningxia-produced wines, he said.

It’s unclear at this stage whether Cui’s proposal will be eventually accepted by the central government, but he told dbHK the central government is reviewing his proposal.

Incidentally, China’s premier Li Keqiang has announced reduction of VAT from 16% to 13% to stimulate consumption amid slowing economy last month.

The official made the comments when China’s domestic wine production has been dropping for the past few years. Last year, wine production saw a whopping 40% drop at a time when imported wines from Australia, Chile and Georgia are benefiting from reduced tariffs.

Cui is the not the first official advocating more lenient taxes on wine, however, Ningxia, Cui’s constituency, is responsible for roughly 25% of China’s overall wine production, and counts itself as the country’s prime wine making region.

The wine industry in Ningxia, unlike other wine regions in China, enjoys strong government backing, and the local government is grooming it to become an industry pillar like its agriculture and energy sectors. At the moment, the autonomous region has 86 wineries and over 570,000 mu (38,000 ha) of vineyards.

Its annual wine production averages around 120 million bottles. By 2018, the wine industry has generated turnover of RMB 23 billion (US$3.4 billion), and created 120,000 jobs, according to the Ningxia Wine Bureau.