The government is considering a proposal to link vehicle tax to exhaust emissions, the State Council's Development and Research Center told China Daily on Friday.

"The government will levy no tax if consumers buy lower-level or zero emission vehicles," said Feng Fei, director of the center’s industry department. "Those who buy cars with higher emissions will be taxed more heavily."

For cars with an engine capacity of more than 3 liters, tax could run as high as 15-20 percent, Feng said.

At the moment, vehicle tax is between 3 and 8 percent and is levied on auto producers before vehicles enter the market.

"We suggest that tax be levied on car buyers directly. This will encourage them to consider more economic vehicles with lower emissions," said Feng.

He said the center recently finalized a report on car tax that has already been submitted to central government, but did not reveal when the suggestions might be implemented.

"The taxation change is mainly aimed at encouraging car owners to consume less oil and at cushioning environmental pressures," said Feng.

A previous report from the development and research center stressed that oil supply and the environment would be great challenges for the country.

It predicted that by 2010, cars will consume 138 million tons of oil each year, 43 percent of China's total oil demand, with this figure growing to 256 million tons, 57 percent of total demand, by 2020.

"In the future urban pollution will mainly be generated by automobiles, unless we are able to effectively control exhaust emissions," he said.

Feng said the proposal to levy a higher tax on cars would not mean suppressing the development of the car industry.

"China's auto industry is vital for driving the country's economy forward," said Feng. "What we need is healthy development in line with the capacity of our resources."

(China Daily June 27, 2005)