China more than doubles tax rate for cigarettes

Individual cigarettes will be taxed an additional 0.005 yuan each, the Ministry of Finance said in a statement. It said the changes will take effect May 10, 2015. -- PHOTO: AFP
Individual cigarettes will be taxed an additional 0.005 yuan each, the Ministry of Finance said in a statement. It said the changes will take effect May 10, 2015. -- PHOTO: AFP

BEIJING (Bloomberg) - China raised the consumption tax on cigarettes to 11 percent from 5 percent, the latest effort by the government to reduce smoking rates as the world's most populous nation battles soaring cancer rates and surging health- care costs.

Individual cigarettes will be taxed an additional 0.005 yuan each, the Ministry of Finance said in a statement. It said the changes will take effect May 10.

The higher rate is forecast to bring in an additional 20 billion yuan (S$4.28 billion) in taxes this year compared to 2014, according to a person familiar with the matter who asked not to be named because that figure hadn't been publicly released.

In China, there are an estimated 3.07 million new cancer cases annually, according to the World Health Organization's cancer agency. Incidence of chronic conditions like heart disease is also rising.

"Increasing tobacco taxes and prices is the single most effective way of reducing tobacco consumption in the short term," Bernhard Schwartländer, the WHO's representative in China, said via e-mail. "The WHO is therefore very pleased to see tobacco taxes increased in China, but it is crucial that the increase be passed on to retail prices."

China is home to about 300 million tobacco users, and cigarettes are often exchanged as a social courtesy.

Following other parts of the world, China has sought to restrict smoking in indoor public places like bars and restaurants. The country gets billions in annual tax revenue from the industry, and the regulator, the State Tobacco Monopoly Administration, also runs the China National Tobacco Corp., producer of 97 percent of China's cigarettes.

The Ministry of Finance did not immediately respond to a faxed request for comment, and calls to the State Tobacco Monopoly Administration, weren't answered.