Cigarette tax rises to 11 percent

Zheng Yangpeng

(China Daily)

Updated: 2015-05-09

Experts doubt increase will deter smokers or affect retail pricing

China raised the consumption tax on cigarettes on Friday, but experts expect the effort to deter smoker may be muted in the world's largest maker and consumer of cigarettes, given the moderate rate increase.

The Ministry of Finance announced an increase in the consumption tax on wholesale cigarettes from 5 percent to 11 percent. Cigarettes will also be taxed an additional 0.005 yuan each, the ministry said, adding that the changes will take effect on Sunday. World No Tobacco Day falls on May 31.

The increase is the first in six years. In May 2009, China raised the consumption tax of A-grade cigarettes from 45 percent to 56 percent.

According to the World Health Organization's comparison of countries, China is among countries that tax cigarettes the least, with the tax imposed amounting to 40.8 percent of the retail price. European countries typically impose a tax that is 80 percent of the retail price of cigarettes. The WHO has recommended a tax of at least 70 percent.

China is far from reaching that level of cigarette taxation, even after the latest increase.

Yang Jie, deputy director of the Tobacco Control Office of the Chinese Center for Disease Control and Prevention, said it remains to be seen whether the latest tax increase would translate into a higher price for consumers.

The government stipulated a 15 percent to 20 percent price add-up from the wholesale price to the retail price, so in theory the extra tax on the wholesale price will push up the retail price.

However, Yang said that in 2009, China's tobacco industry increased their subsidies to cigarette manufacturers to offset the negative effect. As a result, the retail price barely changed.

"If China really wants to curb the number of smokers and reduce cigarette sales, the tax on cigarettes has to be raised much higher, and the tobacco industry should refrain from raising subsidies, or otherwise the effect will be muted," Yang said.

Bernhard Schwartlaender, the WHO's representative in China, said, "The WHO is very pleased to see tobacco taxes increased in China, but it is crucial that the increase be passed on to retail prices."

Anti-smoking activists say China's cigarette habit imposes a heavy burden on the healthcare system. The country is home to 300 million smokers, and at least double that number are exposed to secondhand smoke.

The Chinese government last year received 482.3 billion yuan from levying the consumption tax on cigarettes alone, according to the Ministry of Finance.

zhengyangpeng@chinadaily.com.cn

A man smokes outside a supermarket featuring a cigarette display in Haidian district, Beijing, on Friday. Wang Zhuangfei / China Daily

(China Daily 05/09/2015 page4)