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Experts Propose Tax Refund To Boost Auto Sales

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Shanghai, December 30, 2008: ( To reverse the auto market downturn, an auto industry in China on Dec. 25 suggested an auto credit policy of converting part of the country's idle housing funds to finance car purchases. Meanwhile, some other experts have also proposed the "tax refund" as an effective solution to stimulating car buying, said today.

Back in 1998, Shanghai launched a five-year "tax refund" strategy to jump-start the then sluggish housing market. This policy allowed the first-time home buyer to get back the income taxes he/she has paid from the month of his/her buying the new house in 1998 or after to 2003 when this policy ended. This strategy made the housing market hot in Shanghai during that period.

Now some auto industry experts have suggested that this measure can apply to stimulate the current sluggish auto market as well.

"The tax refund can greatly boost the auto market, and may be even more effective than the cuts in auto sales tax," said Xu Changming, an economic analyst from the state information center. But he also noted that this policy will involve many regulatory bodies and as it has no precedent in the world, it will be very difficult to carry out this good plan in our country.

Other experts have echoed this view, adding that the tax refund, to be realized over a certain period of time, will drive the auto market forward quickly. However, they have the same concerns too and think this policy is not easy to implement, as China's income tax system is still immature, most public servants pay little or no income taxes, and many high-earners have their means of tax avoidance.

Still, CEO Kevin Chen said that this policy will encourage many "waiting and seeing" potential customers to buy their desired cars and this will help revive the auto market.

Of the more than 1,000 voters in an online survey on this topic, 57% think the government should issue the tax refund strategy to stimulate the auto market, while the other 43% think this policy is currently impractical.

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