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Cosmetics Tax Advantages China's Domestic Brands

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A new tax cut will give an advantage to domestic brands, which don't have to factor in the cost of tariffs.

According to a recent report, the general consumer goods sector in China is expanding at about 3.1%, while the skin care and color makeup sectors have risen 12% and 10%, respectively, in the 52 weeks ending June 2016.

The Chinese cosmetics sector was valued at 204.9 billion Rmb in 2015, according to figures gathered by HKTDC Research. To spur growth of domestic brands, the Chinese government has reduced or eliminated consumption taxes on cosmetics.

Non-luxury cosmetics were previously taxed at 30%, which has been eliminated, while luxury cosmetics will be taxed at just 15%. While the cuts will lower the cost of imported brands, they will still suffer from high prices due to tariffs.

The result, then, is a distinct advantage for domestic cosmetics players. It will be compelling to see what effect this dynamic has on the country's market.