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Push to reduce smoking via tax goes up in smoke

By Shan Juan (China Daily)
Updated: 2009-08-08 08:54

A recent hefty hike in the cigarette consumption tax will do nothing to curb smoking in China - the world's largest tobacco producer and consumer - because the price of a pack of smokes remains the same for consumers, say experts.

The tax authorities and tax financial regulators raised the levy on cigarettes by between 6 and 11 percent on May 1.

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But, despite the additional taxes, the price paid by smokers has not changed, noted Yang Gonghuan, director of the Tobacco Control Office under the Chinese Center for Disease Control and Prevention (CDC).

"Only by raising the retail price can the smoking population become smaller," she told China Daily on Friday during a press conference about tobacco control.

China has more than 350 million smokers. About 1 million die from smoking-related diseases each year.

In China, the price of tobacco is largely determined by the authorities, including the State Tobacco Monopoly Bureau.

Hu Ling, a researcher with the public health development center under Tsinghua University, explained that, in order to ensure consumption remained high, the tobacco industry, a major revenue source for the government that is wholly owned, run, and controlled by the government, elected to absorb the tax instead of pass it on to smokers.

Yang said the government monopoly could afford to pay the rising tax out of the fat profits it realizes.

And even with the recent tax hike, cigarettes in China are still taxed at a far lower rate than they are in most other countries. In China, the total tax on cigarettes is around 40 percent while the international average is 60 percent, said the experts.

"We still have enough room for further hikes," Hu said.

A recent online survey conducted by Sohu, one of China's major news portals, showed that 87 percent of respondents supported the tax hike - as long as the extra revenue was used to improve services, such as health care and anti-smoking efforts.

About 90 percent of smokers taking part in the poll said the latest tax hike had no impact on their consumption because of the unchanged cost of cigarettes in the stores.

If the tax increase, likely to equal around 40 billion yuan ($5.88 billion), was passed on to smokers, many people, especially the poor and young, would likely make adjustments, said the experts.

"On one hand, government makes money from people smoking, while on the other hand, they pay in terms of consumption and medical bills from smoking-related illnesses," Yang added.