The revised national consumption tax policy, which became effective Saturday, has sparked a buying frenzy in the city, especially for luxury goods like imported sedans and expensive watches.

Vehicles with an engine capacity of four liters or above, which are now subject to a consumption tax of 20 percent, had all but disappeared from the local market before Saturday.

Under the new tax scheme declared by the Ministry of Finance and the State Administration of Taxation on March. 20, the larger the capacity of the sedan's engine is, the higher the tax it will incur.

A salesperson surnamed Xiao with SCAS Automobile Sales Company said luxury cars with large engines such as Volvo and Land Rover were out of stock, and she didn't expect new supplies until mid-April.

Luxury sedans currently priced at more than 1 million yuan (US$125,000) will see price hikes of between 150,000 to 200,000 yuan after the tax adjustment, driving some potential buyers to place orders earlier than they had planned.

A consumption tax ranging from 5 to 20 percent has also been levied on yachts, golf clubs, expensive watches, disposable wooden chopsticks, and wooden floor tiles.

The Huaqiangbei branch of Oriental Watch Group, Shenzhen's leading dealer of imported watches, reported increased sales last week.

A store employee who declined to be named said the prices of watches by famous designers would increase by less than 20 percent.

"People will go to Hong Kong for imported brand watches if they are sold too expensively," said the employee, adding that there are about 10 types of local brands subject to the revised tax rules.

Shops selling wooden floor tiles have also witnessed a sales boom in the past two weeks as a price increase is expected this month. As many wooden floor makers have increased the prices by 3 to 5 percent, analysts expect the market will cool soon due to the price increases and pre-purchases by home renovators.

The new tax policy, however, will have little impact on the daily consumption of ordinary people who cannot afford luxury items. Chen Jiafa, a director with a provincial taxation authority, was quoted by the Southern Metropolis Daily as saying that the ordinary people may benefit from the adjustment as it eliminates consumption tax on body care products such as soaps and shampoos.

Editor: Yan