Chinese smokers will soon pay more for their cigarettes after the Ministry of Finance announced on Friday that it will increase the wholesale cigarette tax from 5 percent to 11 percent, which amounts to less than one cent per cigarette sold. Today, smokers pay between $0.92 and $2.42 for a pack of cigarettes, and the new tax takes effect on Sunday, the Wall Street Journal reports.
The higher tax is the government’s latest move in a series of efforts to curb China’s smoking rate even as the government depends on the tobacco industry for 7 percent to 10 percent of the nation’s tax revenue, Reuters reports. An indoor smoking ban is set to take effect in Beijing on June 1 and nationwide restrictions on advertising to minors will follow in September, according to the Wall Street Journal.
There are 300 million smokers in China, which is about a third of all the smokers in the world, according to the World Health Organization. Over one-quarter, or 28 percent, of people in China smoke, including over half of Chinese men. The rate of daily smokers is also higher in China than the prevalence of smoking in most modern nations, depicted below through data provided by the Organisation for Economic Co-operation and Development and World Health Organization.
Cigarette prices vary widely by country -- in the U.S., a pack of cigarettes costs $5.51 while the same pack in Russia is less than $2. WHO points out that buying 100 packs of cheap cigarettes in 2000 cost an average Chinese smoker about 14 percent of his or her annual income, but by 2010, those packs cost only 3 percent of the average annual income.
“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,” Bernhard Schwartländer, the China representative of the World Health Organization, told the Wall Street Journal.
But China also produces more tobacco than any other country – 41 percent of the world’s cigarettes are made in China, according to the World Lung Foundation -- and tobacco sales are a key source of income. It remains to be seen whether the pending price hike will be enough to discourage large numbers of Chinese residents from lighting up, or whether it will merely add to the government's lucrative tobacco-based tax revenue stream. The nation's tax revenue recently hit a record high and rose 24 percent from the 2013-2014 fiscal year, even as economic growth has slowed to 7 percent. The government operates China National Tobacco Corp., the largest cigarette manufacturer in the world.