Daily Management Review

China VAT Cuts Prompts Apple, Luxury Brands To Cut Prices


China VAT Cuts Prompts Apple, Luxury Brands To Cut Prices
In a show of encouragement for consumer companies to do business in China, the authorities had announced the reduction of value-added tax (VAT) rate on some products a couple of months back. That reduction came into effect from April 1 which prompted a number of companies, including Apple Inc. and a number of other consumer brands, to lower prices of their products in the Chinese market.
Starting Monday, Apple’s China website showed reduced price tags for its products listed on it which included a large drop in prices of up to 500 yuan or ($74.44 for some of its latest iPhone models.
And according to local media reports, there was also a price cut of about 3 per cent in the suggested retail prices for some well known global brands such as LVMH’s Louis Vuitton and Kering’s Gucci.
A reduction in prices because of the reduction of VAT in the Chinese market was earlier announced last month by car makers BMW AG and Mercedes-Benz which had then said that prices of some of its models would be brought down after the implementation of the tax changes.
There was no comment available from Apple about the price cuts. There were no immediate comments also available from Kering despite queries form the media.
The drop in prices of its products in China was confirmed by a spokeswoman for Louis Vuitton and had said that the brand is “fully supportive of the Chinese government’s ongoing efforts to narrow the price gap between China and overseas”.
In March this year, Chinese authorities had announced that taxes and fees that it collects from companies would be dropped in 2019 by almost 2 trillion yuan. The major focus of the drop in taxes has been the manufacturing, transportation and construction sectors because the companies are critical for the Chinese economy as Beijing is now seeking to stimulate its economy that has shown signs of a slowdown.
China, the second largest economy of the world, has recently been growing at a rate that is slowest in almost last three decades because of lower demand in the domestic market and with the exports suffering because of a trade war with the United States.
In January, prices were lowered for iPhones by a number of Chinese electronics retailers in China where in discounts of up to $118 were provided for some of the latest models after the market reported weaker than expected sales of iPhones at the end of 2018.