If you're a smoker in China, you'll be paying about a penny more per puff, now that the Chinese government has decided to hike taxes on cigarettes. In an effort to curb the public's avid consumption, while at the same time raise tax revenue, the government announced Friday they will be increasing taxes on cigarettes from 5% to 11%, beginning May 10. Currently, a pack of cigarettes in China costs between $.92 and $2.42.
This is the second tobacco tax hike in six years, but this time, the pinch will be felt, not by the industry itself, but by consumers. In the presence of a slowing economy, with first quarter economic growth at a meager 7%, officials hope to boost what is the weakest rate in six years.
But that might be hard to do, since the government reaps about 7 to 10% of the nation's tax revenue from the tobacco industry. Unlike America, where tobacco is produced by private companies, the main tobacco producers in China are state-owned and provide direct revenue to the government. In fact, the government-operated China National Tobacco Corporation is the largest cigarette manufacturer in the world. According to the Wall Street Journal, bureaucrats often conducted business amidst a cloud of smoke and cigarettes are regularly exchanged as gifts between officials.
The ban may not do much to boost tax revenue, but any measure that might curb smoking rates in China would be a positive move, for Chinese smokers are some of the most voracious consumers on the planet.
According to the American Cancer Society and the World Lung Foundation, there are more than 300 million smokers in China, resulting in 1.2 million deaths annually. And that number is only expected to rise. By 2030, deaths are expected to reach a whopping 3.5 million. The Chinese are the world's largest consumers of tobacco, with over a quarter of the population puffing. They are surpassed only by Estonia (at 26%), while they are tied with the French. Over half of all Chinese men smoke.
As the health costs soar, the price of cheap cigarettes has actually gone down, making them that much easier to purchase. WHO reports that in 2000, the cost of 100 packs of cheap cigarettes cost the average Chinese smoker around 14% of his or her average income. By 2010, the same number of packs cost only 3 percent of annual incomes.
Bernhard Schwartländer, the China representative of the World Health Organization, said recently in an interview with the Wall Street Journal, "There is a direct link between the price of tobacco products and the level of consumption: In other words, the higher the price, the more lives that will be saved."
Not only will cigarettes be more expensive, it will also be more difficult to find a place to light up. Indoor smoking bans go in effect as of Jun 1, which will include restaurants, bars, and other indoor venues. Individual violators will pay a small fee of 200 yuan (about $33) while companies caught violating the rules will have to cough up about 10,000 yuan. By September, nationwide restrictions on advertising geared to underage consumers will be in place, in the hopes of ushering in a new generation of non-smokers.