China: Government raises tax rate on cigarettes to 11 percent

The Chinese Ministry of Finance has announced that from 10 May 2015 on, the consumption tax on cigarettes will be 11 percent. This means that the rate, previously at 5 percent, has been more than doubled. Additionally, cigarettes that are sold individually will be taxed an extra 0.005 yuan.

After restrictions on smoking in public places and strengthened measures on tobacco advertising, this marks the next step in the country’s efforts to reduce the prevalence of smoking. In 2014, an estimated 24 percent of all adults were daily smokers, leading to rapidly increasing rates of cancer and heart diseases as well as health care costs.

The tax increase is in line with Article 6 of the WHO Framework Convention on Tobacco Control and the corresponding Guidelines for implementation. However, the objective of these measures, i.e. demand reduction, can only be achieved if there is an actual impact on retail prices. In the past, this has not always been the case – e.g. the mentioned 5 percent tax that was introduced in 2009 was not passed on by the country’s state owned tobacco monopoly.

This concern is shared by the WHO representative in China, Bernhard Schwartländer: “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.”

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