China raises tax on cigarette sales
Print Edition
CHINA is raising the wholesale tax on cigarettes tomorrow to 11 percent from 5 percent, the Ministry of Finance said yesterday, in a bid to deter smokers in the world’s biggest maker and consumer of tobacco.
Wholesalers will also pay an additional 0.005 yuan (less than 1 US cent) for each cigarette they sell, according to a statement by the finance ministry and the State Administration of Taxation.
If the rise is passed on to consumers, the ministry’s Research Institute for Fiscal Science said, they will pay 7 percent more for each pack on average. The move is expected to cut consumption by 4 to 5 percent and add 100 billion yuan (US$16 billion) to annual tax revenue, according to institute statistics.
The industry paid 911 billion yuan in taxes in 2014, accounting for 8.8 percent of total tax revenue. This is expected to exceed 1 trillion yuan this year.
Zheng Rong, a professor at Beijing-based University of International Business and Economics, said the increase, if passed on to consumers in its entirety, means tax would make up 56 percent of cigarettes’ retail prices in China, lower than the world average of 65 to 75 percent.
As the world’s largest tobacco maker and consumer, China has more than 300 million smokers, almost the size of the population of the United States, and another 740 million people are exposed to second-hand smoke each year.
About 1.36 million Chinese people die from smoking-related diseases annually.
To curb the number of smokers, China’s top legislature last month adopted an amendment to the Advertisement Law, banning tobacco advertising on mass media, in public places, public vehicles and outdoors.
China has been accelerating a campaign against smoking over the past year, despite opposition from the tobacco industry.
Domestic and foreign anti-smoking activists say China’s cigarette habit has come at a heavy cost to the health care system.
Gan Quan, director of the China office for the non-profit International Union Against Tuberculosis and Lung Disease, said the development was welcome but didn’t go far enough.
“It’s good news because raising the tax will result in higher prices, and that will help keep young people from smoking,” he said.
“At the same time, in terms of the extent of the tax hike, it’s still a long way from other countries that have done very well in curbing smoking.”
Many cities in China have already banned smoking in public places, but critics say those curbs are enforced unevenly, or not at all.
“Increasing tobacco taxes and prices is the single most effective way of reducing tobacco consumption in the short term,” said Bernhard Schwartlander, the World Health Organization’s representative in China.
“The WHO is therefore very pleased to see tobacco taxes increased in China, but it is crucial that the increase be passed on to retail prices.”
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