China'S Dismantling Of High Priced Luxury Goods: Tax Raises 20%&Nbsp; Brand Business Accounts For 30%

In China, an import price of 3500 yuan.

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Yu Ning did not hesitate to buy this brand name luggage, which was equivalent to 80 percent off, and became a member of the Chinese people buying luxury goods abroad.

However, since April 20th, Yu Ning once again wants to buy cheap luxury brands and has made another choice -- Hainan.

Recently, the Hainan "Islands tax-free" shopping policy pilot was finally settled, and will be implemented in April 20th.

According to this policy, Islands's tax-free taxes are tariff, import value-added tax and consumption tax.

Lv Yong, deputy director of the Hainan Provincial Department of finance, said that the Islands Hainan passenger shopping tax exemption range as high as 30%-50%.

Luxury brands have the highest price in China, which is an indisputable fact.

A LV (Louis Weedon) handbag's classic Speedy 30. Currently, the selling price of the store in Heng Lung Plaza, Shanghai is 5750 yuan, which is 5750 Hong Kong dollars (equivalent to RMB 4841 yuan) in Hongkong, China. It sells for 730 dollars in the United States (about 4790 yuan), 440 pounds in Britain (4688 yuan), and 485 euros in France (equivalent to about 4500 yuan).

The price comes from the LV global official website. It is not hard to find that this handbag is the lowest price in France, which is 21% cheaper than Hang Lung Plaza.

Jiangfeng (a pseudonym), an international top brand retailer in Greater China, explained to reporters the profit sharing of luxury goods.

The official told reporters that the government's high tax revenue and the sales mode of domestic commercial property and retailers are the two main reasons leading to higher domestic sales of luxury goods than foreign countries.

Tax relief alone is not enough to eliminate the spread of luxury goods at home and abroad.

Dismantling

Tax raises 20%

8 years ago, Jiangfeng became a luxury Chinese brand agent in Greater China.

Jiang Feng introduced that with its main import clothing as an example, the import tariff rates of different fabrics were different, but generally between 16%-18%, plus 17% of value-added tax in import links, clothing did not need to pay consumption tax, so the total proportion of tax to be paid was 35%.

Besides, according to the different ways of shipping and air pportation, the cost of pportation is about 1%-2%.

If the price of a garment is 100 U. S. dollars, then the cost of the garment will reach 135-140 dollars after reaching China, Jiang Feng said.

Jiang Feng disclosed that the general retailer should guarantee its gross profit of 60%. Therefore, the final selling price of the goods is priced according to the formula of the cost of landing cost 2.5, so if the cost is calculated at the cost of 140 dollars, the final price of the imported garment will be 350 dollars.

Of the $140 cost of landing, 35 of US $35 is tax revenue from the government. After the clothing was sold in the country, the amount of 350 US dollars minus the cost price of US $210 would also need to pay 17% of value-added tax in domestic sales, which is equivalent to 35 US dollars. In this way, the government's tax on this dress is about 70 dollars, which is equivalent to the 20% of the final price.

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Dismantling two

Department stores draw 20%

Besides tax revenue, Jiang Feng believes that another reason for the high price of domestic luxury goods is the sales of domestic commercial property owners (department stores) and retailers.

According to people familiar with the matter, if a brand retail agent wants to enter domestic department stores, shopping centers and so on, these commercial property owners and retail agents adopt the leasing mode of "bottom rent or sales pull high". For luxury brands, the proportion of sales is 20%-25% of sales, and sales of domestic brands are up to 30%.

As a result, for a garment priced at $350, the 20%-25% of its sales needs to be paid to department stores. If the value is taken, it is equivalent to 80 dollars for the department store.

Jiang Feng told reporters that the pricing model abroad is "extra tax", that is, the price of goods that consumers see does not include tax price, so the final payment is higher than the price, but the domestic pricing mode is "internal price tax", that is, the price includes the tax price. In this way, because of the way of sales by department stores, the retailer's part of the tax to be paid to the government must also be partly removed by the department store. Therefore, in order to avoid such a situation, retailers will raise the amount of tax paid to the government in accordance with the proportion drawn in order to avoid such a situation, so as not to hurt their profits.

In addition, the mode of fixed rent abroad can reduce the cost of rents for retailers if they increase their sales revenue, so they often reduce prices to achieve the goal of "small profits but quick turnover". But the higher the sales revenue of retailers in the country, the higher the rate of sales to department stores. Therefore, the reduction of sales is not good for themselves, so luxury brands generally do not sell at a reduced price.

Dismantling three

Tracing the price inversion at home and abroad

There is a domestic view that luxury brands in the domestic middle trading link is also a cause of high prices. However, many veteran people in the industry do not agree with this view. They say that LV, Burberry and other first-line brands have been directly operated in China. Why is there still no price cut?

Zhu Mingxia, director of the Cheung Kei luxury Research Center, University of International Business and Economics, told reporters that many consumers in the country had psychological pricing to "buy only expensive, not buy the right". The purpose of buying luxury goods is to show off themselves, and the consumption psychology is not mature enough.

The market demand for gift consumption is strong, so the pricing of the Chinese market is high for those multinational companies that have control over the price of international brands.

At the same time, Jiang Feng believes that in fact, not only luxury goods exist in the domestic market, but the "high price" of the government, as well as the sales mode of domestic commercial property and retailers, also create the problem of "price upside down" for other commodities, but because the absolute price difference of luxury goods is very high, it makes people feel deeper.

Economist Ma Guangyuan recently commented that domestic and international price upside down is not just luxury.

Some basic daily necessities, some very common international brands, and many even produce goods exported to the outside of China, which are far cheaper than domestic ones.

Last year some people in Guangdong even went to Hongkong to buy daily necessities, which is enough to illustrate the problem.

Luxury can stimulate consumption, but luxury goods no matter how luxurious, it occupies a very small proportion in the whole consumption. In order to really promote consumption, the system should give more care to some popular brands, such as cosmetics, clothing, shoes and so on. Raw materials, production and processing are all in the territory, but the price of selling in the domestic market is much higher than that of overseas, which is undoubtedly a great satire.

Therefore, by lowering the cost of the intermediate links and circulation links of these brands, reducing the tariffs of the mass brands and promoting the consumption of the masses, this is the fundamental problem.