Lenovo Chief: Tax to Blame for High Prices

Yang Yuanqing, CEO of Lenovo Group Ltd and a member of the Chinese People's Political Consultative Conference, said the country's value-added tax is to blame for the high prices of goods.

“We have to pay an extra 17 percent tax to sell goods in China,” he said during a group discussion on Sunday. “That’s why our computers are more expensive here than in the US.”

On Lenovo’s global website, an IdeaPad K1 Tablet (32GB) was priced at $499.99 in the US, much cheaper than the 3,499 yuan (US$554) it costs in China. An iPhone 4S (16G), meanwhile, was priced at 4,988 yuan in China, or 20 percent higher than the US$649 in the US.

To sell any product on the Chinese mainland, whether it is imported or produced domestically, sellers must pay a value-added tax charged at a rate of 17 percent or 13 percent. The only exception is made for products that are to exported. According to an export-refund policy introduced in 1985, such things are exempt from the tax.

The rate of China’s value-added tax is quite high, said Shen Zhaozhang, a professor of economics from Jinan University, Guangdong province. His study found that the rate in Japan is 4 percent and 10 percent in Europe on average. As for the US, it has no value-added tax.

A spokesperson with the Ministry of Commerce conceded last year that China imposes taxes at a relatively high rate on many products. Zhao Linzhong, an entrepreneur and a deputy to the National People’s Congress (NPC), said the tax has added a great cost to products sold on the Chinese mainland, a cost that will eventually be borne by customers.

Various NPC deputies and CPPCC members have said tax reductions should form the centerpiece of the country’s fiscal policy.