China to end auto tax incentive

China's Ministry of Finance said Tuesday that the country's purchase tax for passenger cars with engines of 1.6 liters or less will be set at 10 percent from January 1, ending an incentive policy under which the level was 7.5 percent.

Effective from January 1, 2011, a sales tax of 10 percent will be imposed on cars with a 1.6-liter engine or smaller, said the ministry on its website.

Tax on purchase of cars with engine capacity of 1.6 liters or less will be restored at 10 percent from Jan. 1 from 7.5 percent at present. The government had in January 2009 halved the tax to 5 percent to stimulate car purchases in the wake of the global financial crisis, before increasing the rate to 7.5 percent from the beginning of this year.

China currently offers a 3,000 yuan ($451) subsidy on vehicles with engines of 1.6 liters or smaller.

China's total vehicle sales including trucks and buses surged 34 percent to 16.4 million in the 11 months through November, the China Automobile Industry Association said earlier this month. Auto sales may rise to 18 million units this year, the association said earlier this month.