Chinese Luxury Tax Upsets Swiss Watchmakers

China’s new 20 percent sales tax on luxury watches (i.e., over $1,200 retail), which became effective April 1, has upset Swiss watchmakers and the Swiss government. Almost all imported luxury watches sold in China (99.6 percent) are Swiss. Switzerland has urged China to rescind the tax, but it refuses to do so. The consumption tax—which China says is intended to reduce a widening gap between its country’s rich and poor—will slow down Swiss watch sales in China, warned Swiss industry sources. China imported $2 billion worth of Swiss watches in 2005, making it the 10th most important market among Swiss watchmakers. The Swatch Group, the world’s largest watchmaker, sells 8 percent of its products (especially upscale watches) in China. It urged the Swiss government to press China to end the tax. Omega, a high-end Swatch Group brand, is the official timekeeper for the 2008 Oly
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