A passenger pushes his luggage cart inside Terminal One of Shanghai Pudong International Airport. Shanghai plans to offer a tax rebate to foreign visitors and the first batch of stores are likely to be located in Pudong district. [Photo / Bloomberg]

Shanghai to increase tourism by offering an incentive to foreigners

SHANGHAI - Shanghai is working on a plan to give a tax rebate to foreign shoppers, in a move to attract overseas spenders, said an official with the local commerce commission on Wednesday.

The move by the city, which has pledged to be an international financial and shipping hub by 2020, follows a similar one by Hainan province. Effective from Jan 1, foreign tourists to the island province can apply for a tax rebate of 11 percent of their total purchase.

"The Commission of Commerce is working on a plan for the tax rebate, which will be finished after the Spring Festival holidays. Then we will submit the plan to the municipality and then central government for approval," said Chen Yuxian, deputy head of the Industry Supervision Department of the Shanghai Municipal Commission of Commerce.

"Now that Beijing has given a green light to Hainan, we don't see why we can't get the nod too." Unlike Hainan, which will implement the policy on all parts of the island, the tax refund in Shanghai will be limited to certain department stores, Chen said.

He added that the first batch of stores are likely to be located in Pudong district and Hong-qiao Central Business District, but when the tax rebate will be realized and how much that rebate will be has yet to be decided.

"Now the question is which type of tax will be reduced for the rebate, the state tax or the local one? China's taxation system is complicated and there is going to be a conflict of interests," Chen said.

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The rebate plan dovetails with the government's aim of developing international tourist resorts in the city to raise its image as an international metropolis. That intention is part of the draft of the city's 12th Five-Year Plan (2011-2015), the guideline for the city's economic development.

Earlier this month, Shanghai announced that it will make the Suzhou River one of its "calling cards", like the Hudson River is to New York, by building nine marinas and developing high-end sightseeing projects on the river.

In November, Walt Disney Co inked an agreement with the Shanghai municipal government to start construction of a long-awaited theme park in the city, 15 years after the two sides first opened discussions on the project.

Chen said the tax rebate would greatly boost foreigners' spending in Shanghai. "It will not only stimulate spending by tourists who come for pleasure but also foreigners on business trips. A large group in Shanghai will tend to buy something if they find good value."

During the first half of this year, 7 million overseas visitors spent about $6 billion in the city, according to Shanghai's tourism bureau.