Officials eye another tax hike for cigarettes

Top health authority hopes to force tobacco industry to increase prices

The nation's top health authority is pushing for a hike in the cigarette tax and retail prices to curb smoking in China, the world's largest tobacco producer and consumer, a senior health official said.

Yao Hongwen, a spokesman for the National Health and Family Planning Commission, announced the proposal at a news conference on Wednesday.

China last raised its cigarette tax in 2009, but cigarette companies didn't raise their prices.

"The commission has been working closely with related departments to further raise the tax and the price of tobacco products to better ensure public health," Yao said.

However, Li Baojiang, a researcher in the tobacco economy research institute of the State Tobacco Monopoly Administration, said more research and caution is necessary before raising the tax.

"Issues like whether a tax hike would lead to tobacco trafficking remain unclear," he said.

The total cigarette tax is about 40 percent, after an increase of 6 to 11 percentage points in 2009, the commission said. The World Health Organization recommends that the cigarette retail tax be at least 70 percent of the retail price to reduce tobacco use.

Not only does China lag far behind the WHO standard, the 2009 tax hike didn't affect the cigarette retail price at all, said Yang Gonghuan, former head of the tobacco control office of the Chinese Center for Disease Control and Prevention.

"The tobacco producers simply absorbed the tax hike to maintain the prices and keep the smokers," she said.

Gan Quan, the China director of the International Union Against Tuberculosis and Lung Disease, said another tax increase on tobacco products would further squeeze the industry's profit.

"They finally would have no other choice but to raise retail prices," he said.

Yao agreed, adding that doing so "won't hurt government taxation income from cigarettes."

He cited the example of South Africa, where consumption fell 30 percent after the government raised the tobacco tax from 32 to 52 percent.

The government's taxation revenue increased substantially at the same time, he added.

"It's a win-win situation to curb smoking and increase tax income," he said.

Last year, the tobacco industry contributed more than 960 billion yuan ($155 billion) in taxes, accounting for 8.6 percent of the nation's total, the central government said.

China has more than 300 million smokers, and more than 1 million die every year from smoking-related diseases, according to the commission.

A study led by Yang Gonghuan found that by 2010, the direct medical cost of treating smoking-related diseases was more than 66.4 billion yuan.

She urged the government to introduce a further tax hike to avert the public health threat that smoking poses.