China imposes 20-per-cent tax hike on cigarettes, state media say

Jun 22, 2009, 9:17 GMT

   Beijing - China aims to discourage smoking by raising the taxes on cigarettes and other tobacco products by more than 20 per cent, state media said Monday.

   The tax for a 10-pack carton of cheaper cigarettes costing less than 70 yuan (10 dollars) will rise from 30 per cent to 36 per cent, while all wholesale tobacco products will also be subject to a new value-added tax of 5 per cent, the official Xinhua news agency and other state media quoted the government as saying.

   The tax hike is also designed to 'moderately increase financial revenue' and improve the taxation mechanism, the agency quoted a statement by the finance ministry and the state tax administration as saying.

   The tax for luxury brand cigarettes costing more than 70 yuan a carton will increase from 45 per cent to 56 per cent, while the tax on cigars will rise from 25 per cent to 36 per cent, it said.

   The reports said the cost of the tax hike had still not been passed on to consumers, despite the government announcing new rates from May 1.

   The joint statement quoted by state media was not available on Monday on the websites of the Ministry of Finance or the State Administration of Taxation, while calls to the two ministries went unanswered.

   The China Daily newspaper also quoted the Chinese Association of Tobacco Control as saying on Sunday in reaction to the tax increases that such policies were effective and could 'prevent young people from smoking and encourage more smokers to quit the harmful habit.'

   But an official at the association told the German Press Agency dpa by telephone that its statement was issued in late May.

   China has an estimated 350 million smokers among its 1.3 billion people, with 540 million others affected by passive smoking.

   The World Health Organization warned in 2007 that without government intervention annual deaths from smoking in China could rise from about 1 million now to 2.2 million by 2020.

   Some poor rural areas of China rely heavily on revenue from tobacco growing and cigarette production, making the government, which has a state monopoly over the industry, slow to discourage smoking.

   Mao Zhengzhong, an expert in public health at China's Sichuan University, told China Daily that the new tax increases were not enough to curb smoking, urging the government to impose a 65-per-cent tax on retail sales of tobacco.

   'The main purpose of this policy is to increase the tax revenue from cigarettes, not to control smoking in the country,' Mao was quoted as saying.