Taxing the habit

Raising taxes and prices have been proved to be the most effective means to reduce smoking, says Teh-wei Hu, professor of health economics in the School of Public Health, University of California, Berkeley.

However, cigarettes have become more than twice as affordable in China since 1990, and smoking is much cheaper than in other countries, says Hu, also a senior policy advisor to China's Ministry of Health.

The overall effective tax rate of 40 percent on a packet of smokes in China is much lower than the international average which ranges from 65 percent to 70 percent.

The tobacco industry has long argued that tax increases risk cutting government revenues, but Hu says a tax rise would actually raise revenues while reducing tobacco demand.

In Thailand, as the tobacco tax rate increased from 55 percent in 1992, to 70 percent in 1999 to 79 percent in 2006, packets of cigarettes sold fell from 2.035 billion, to 1.81 billion to 1.793 billion, according to the Excise Department and the Ministry of Finance of Thailand.

The data also showed revenues generated by the industry grew from 15.44 billion Baht ($514 million) in 1992, to 26.71 billion Baht in 1999 to 35.65 billion Baht in 2006.

Hu's study showed that raising the tax on a pack of cigarettes by 1 yuan would increase the Chinese government's revenues by 64.9 billion yuan, reduce the number of smokers by 3.4 million, reduce medical costs by 2.68 billion yuan and generate a productivity gain of 9.92 billion yuan.

However, the decision to raise consumption tax on cigarettes by between 6 percent and 11 percent in May 2009 brought increased revenues -- but no reduction in tobacco use.

"The tax increases had no impact on cigarette prices set by the STMA, as the tobacco producers and dealers had a big enough profit margin to absorb the burden themselves rather than pass it on to consumers," Hu says.

If China's tobacco tax rose to 51 percent, from the current 40 percent, of the retail price, the price of cigarettes would be affected and the number of smokers will decrease, according to Hu's study.

The effect of price increases is also weakened by the wide price range, with the cheapest costing about 30 US cents per pack and the most expensive as much as $80, which makes it easier to switch to cheaper brands, Hu says.

As more than half of Chinese smokers pay less than 5 yuan per pack, a big enough tax hike would persuade many poorer smokers to quit if almost 11 percent of their household expenditure went on cigarettes, says Hu.

Disgusting pictures

Given China's unique tobacco culture, experts say clear health warnings on cigarette packets would be another effective tool in curbing demand.

Cigarettes are often handed out as gifts to parents, bosses, teachers and even doctors. Traditional wedding dinner ritual requires the bride to light a cigarette for each of her male guests.

Putting clear and gruesome pictures on packaging would be very effective in reducing demand in China, says Jiang Yuan, deputy head of the China National Tobacco Control Office.

"First, this would help eradicate the tobacco culture and help scare away many potential smokers; secondly, as a large quantity of cigarettes are bought in China as gifts for family or bosses, a big picture of a horrible lung would gradually stop many from seeing it as gift," she says.

However, health warnings on Chinese cigarette packs never include pictures and are in tiny characters, half of which are in English that most Chinese cannot understand, but the cigarette makers put large warning signs on the packs sold abroad to accord with local laws.

But many fear gruesome pictures, such as diseased lungs, on cigarette packs could provoke an outcry, as Chinese brands often have names related to its cultural and historical heritage, such as "Zhonghua" (China), "Zhongnanhai" (the residence of China's leadership), "Huangshan" (Huangshan Mountain), "Panda" and even "The Great Hall of the People."

Many people, including those anti-smoking campaigners, argue that revolting pictures would deface China's image.

At the 2008 International Tobacco Control Conference in Durban, South Africa, China was given the "Ashtray Award" because it "would rather have pretty cigarette packs than healthy citizens."

Experts say a national law to ban smoking in public places and regulate health warning labelling would be effective. "The process is very slow. If you want to know the reason, please ask the STMA," says Jiang.