Smokers and coffers

Cigarette price increase will help the taxman

Smokers and coffers

One of 1.7 trillion taxable moments

The year 2278 could be a significant one for China. Why? Well, that’s how long it could take the country to quit smoking.

The math is frighteningly simple: if you assume as many Chinese can quit each year as Americans do, it would take 269 years for China to become smoke-free.

There are 350 million smokers in China, and that number is not declining. In a nation where 60% of doctors smoke, and where the word cigarette translates rather poetically as ‘fragrant smoke’, the habit of lighting up 1.7 trillion times a year is hard to break.

It’s not hard to see why. A survey of 16,000 smokers in 20 Chinese provinces found that 70% did not even know that smoking posed a health risk.

Nor are there signs of the younger generation knowing much better. Of the 130 million young people aged between 13 and 18, around 15 million already smoke and 40 million more would like to, according to the 2008 China Tobacco Control Report.

But this week the government announced that consumption taxes on cigarettes would be increased. Cheaper cigarettes – those costing less than $10 per 200 stick carton – will face a 6% tax hike. The more expensive brands – $10 and more per carton – will see a more punitive 11% rise.

“The move will save the lives of millions,” said Li Ling, a professor at Peking University. The China Daily concurred, running the headline: “Cigarette tax increased to cut smoking”.

But not so fast. Many think this latest policy shift is less about discouraging smoking and more to do with repairing the fiscal situation. In the first five months of the year the government’s tax revenues fell 6.7%. It derives 9% of its total tax take from tobacco sales and a government source told Reuters that the increased cigarette duties would bring in an extra Rmb30 billion ($4.38 billion) this year.

“The main purpose of this policy is to increase the revenue from cigarettes, not to control smoking in the country,” argues Mao Zhengzhong, a professor at the College of Public Health in Sichuan University.

Mao adds that cigarette makers may even pass on all, or part, of the tax to retailers, or absorb it themselves. If he is right the average consumer will not see much of a change in price, and ergo will smoke just as much.

Case in point: Li Lin, a clerk at a cigarette shop in Beijing’s Chaoyang District. He told China Daily that prices have not gone up yet, but even if they do, it won’t stop him smoking. He gets through two packs a day and says he can give up meals but not cigarettes.

Sounds like our target for the year 2278 may be a little over-optimistic…

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