A new report "Tobacco Tax and Its Potential Influence on China", launched at a press conference in Beijing on December 15, calls for a substantial increase in tobacco taxes in order to cut the number of smokers.

The report's authors are Professor Teh-wei Hu of the University of California at Berkeley, Professor Mao Zhengzhong of Sichuan University, Shi Jian, vice director of the Theoretical Research Institute of the State Administration of Taxation (SAT), and Chen Wendong, also of SAT.

Every year 1 million of China's 350 million smokers die from tobacco-related illnesses and the number is expected to increase to 2 million by 2020. Economic losses from smoking amount to 186 billion yuan every year or 1.9 percent of GDP.

A one-yuan increase in duty on a pack of cigarettes would save 2.7 billion yuan in medical costs. Furthermore with people taking less time off work, 9.92 billion yuan of additional revenue would be produced.

The report says China's 40 percent tobacco tax is much lower than the international standard of 65 percent. Raising the tax rate to 51 percent – equivalent to one yuan on an average pack of cigarettes--would reduce the number of smokers by 13.7 million and save 3.4 million lives, while increasing government revenue by 64.9 billion yuan.

The report puts forward several specific policy suggestions:

--Raise the tobacco consumption tax by between 1 and 4 yuan per pack, and gradually increase it to 60 percent of the retail price.

--Replace the present two-tier duty with a single rate of tax.

--Annually adjust tobacco taxes to reflect prices and consumer purchasing power.

--Cancel the tobacco leaf tax. The central government should increase tobacco consumption tax and transfer a portion of the increased revenue to local governments to cover their losses.

--Reform the tobacco revenue distribution system so as to provide more financial support for local governments.

--Spend increased tobacco revenue on tobacco control activities, such as anti-smoking campaigns.

Xu Guihua, vice chairman of the Chinese Association on Tobacco Control, said the report was a major contribution to the fight to control smoker numbers and reduce tobacco consumption.

(China.org.cn by Fan Junmei, December 17, 2008)