Experts Urge Revised Tobacco Tax as China Remains World’s Biggest User After 11 Years of Controls

Experts Urge Revised Tobacco Tax as China Remains World’s Biggest User After 11 Years of Controls

Ma Xiaohua

Date: Mon, 12/04/2017 - 19:57 / source:Yicai
Experts Urge Revised Tobacco Tax as China Remains World’s Biggest User After 11 Years of Controls
Experts Urge Revised Tobacco Tax as China Remains World’s Biggest User After 11 Years of Controls

(Yicai Global) Dec. 4 -- Insiders are urging China to more fully implement control measures and impose a continuously-adjusted cigarette tax to achieve the target of a 20 percent smoking rate.

Smoking is on the wane worldwide, but the number of tobacco users in China remains unchanged.

The smoking rate is now 27.7 percent, with the number of puffers at 316 million, a number of adult smokers unchanged from 2010. The daily number of cigarettes a smoker consumes is 15.2, an increase of one over 2010, Jiang Yuan, director of the tobacco control office under the Chinese Center for Disease Control and Prevention (China CDC), said at the Tobacco Tax and Tobacco Economics Media Advocacy Conference held Dec. 1.

The results of China’s 11-year tobacco control campaign offer little cause for optimism. China remains the world’s number-one tobacco consumer, with total sales in the nation equal to the combined sales in the countries ranking from second to 29th, data show.

Though in recent years China's health insurance coverage has expanded to provide more medical coverage, about one million people still die from tobacco-related ailments each year.

The effects would be very impressive if restrictive tobacco policies were fully implemented, Jiang said. Existing tobacco control measures have nonetheless produced some effect. After Beijing slapped a total ban on smoking in enclosed spaces, smoking rates dropped 4.7 percent overall, with the ranks of male smokers thinned by about 9 percent.

By the end of last year, however, only about 20 cities nationwide had formulated laws and regulations for smoke-free public places that fit the requirements of the policy, covering only one-tenth of China's total population. Over 90% of cities still lack legal rules for smoke-free public spaces.

Some experts recommend raising tobacco taxes. Starting from May 10, 2015, China notched the wholesale ad valorem duty rate on cigarettes from 5 up to 11 percent, as well as imposing a specific duty of CNY0.005 on each cigarette.

“China's tobacco tax rise has had an effect. Sales of cigarettes declined for the first time since 2001 in 2015, down 2.36 percent over the same period. They dropped 4.61 percent from May 2015 to April 2016 over April 2014 to May 2015, and fell 5.36 percent from October 2015 to September 2016 compared with from October 2014 to September 2015,” said Prof. Zheng Rong with the University of International Business and Economics.

Tobacco sales have thus declined for the first time, and this is also one step toward successful tobacco control. However, the tax still needs national policy support to continue to achieve its effects.

“The tobacco tax reform introduced in 2015 has proven to be a win-win measure that has benefited both China's fiscal and public health, but the impact of the increased tobacco tax in 2015 on control will soon ebb, as tobacco sales are expected to rise this year. In fact, the tobacco tax should be revised each year,” Zheng suggested.

Some experts also suggest that the cigarette industry should transform into a tobacco control industry.

China’s tobacco monopoly system has multiple goals, some of which have exerted a negative influence on control of the commodity. The objective of ‘safeguarding state revenue’ forms a strong internal force of resistance to tobacco control and distorts the aims of the monopoly system. To eradicate this opposition and eliminate institutional barriers, a market mechanism should be gradually introduced per the premise of maintenance of government control over the tobacco industry, said Prof. Hu Angang with Tsinghua University’s School of Public Policy and Management.

Any amendments to applicable laws and regulations should focus on China’s Tobacco Monopoly Law and abolish its stated aim of ‘levying state revenue,’ revising this to ‘intensifying tobacco control.’For local governments in tobacco-producing areas affected by reduced tobacco, value-added and business taxes arising from stricter control, the central government should offset the local government fiscal revenue drop stemming from industry transformation via transfer payments to serve the interests of both it and local governments, Hu added.

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Keywords: Tobacco, Tobacco tax