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Friday, May 8, 2015, 18:02

China raises cigarette tax to 11%

By Xinhua
China raises cigarette tax to 11%
A man smokes his cigarette as he admires a new art display of a glass container with ten thousands cigarettes stacked up, on display on the main square of Xiamen city, in southeast China's Fujian province May 30, 2007, to coincide with World No Tobacco Day May 31. (CHINA OUT GETTY OUT AFP PHOTO)

BEIJING - China announced on Friday that it will raise the consumption tax on cigarettes at the wholesale level, starting from May 10.

The tax rate imposed on cigarette wholesalers on the basis of taxable prices will be increased to 11 percent from 5 percent, and they will also pay an additional 0.005 yuan (less than 1 US cent) for each cigarette they sell, according to a statement jointly issued by the Ministry of Finance (MOF) and State Administration of Taxation.

The statement did not give any explanation for the tax increase.

The MOF's Research Institute for Fiscal Science said if the higher tax was passed on to cigarette consumers, they will pay 7 percent more for each pack on average.

The move is expected to cut cigarette consumption by four to five percent and add 100 billion yuan to annual tax revenue, according to statistics from the research institute.

The industry paid 911 billion yuan in taxes in 2014, accounting for 8.8 percent of total tax revenue. This is expected to exceed 1 trillion yuan this year.

Zheng Rong, a professor at Beijing-based University of International Business and Economics, said the tax increase, if entirely passed on to consumers, means tax would make up 56 percent of cigarette's retail prices in China, lower than the world average of 65 to 75 percent.

As the world's largest tobacco maker and consumer, China has more than 300 million smokers, almost the size of the US population, and another 740 million people are exposed to second-hand smoke each year.

According to official data, some 1.36 million Chinese people die from smoking-related diseases annually.

To curb the number of smokers, China's top legislature last month adopted an amendment to the Advertisement Law, banning tobacco advertising on mass media, in public places, public vehicles and outdoors.

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