SPECIAL COMMUNICATION

Recent Tobacco Tax Rate Adjustment and Its Potential Impact on Tobacco Control in China

Teh-wei Hu^1,*, Zhengzhong Mao², Jian Shi³

¹ UC Berkeley, School of Public Health, United States;
² Sichuan University, Department of Health Economics, China;
³ Research Institute of Taxation Science, State Administration of Taxation, China

Correspondence to: Teh-wei Hu, School of Public Health, University of California, Berkeley, Professor of Health Economics, School of Public Health, University of California, Berkeley, 412 Earl Warren Hall, Berkeley, CA 94720-7360, USA; thu{at}berkeley.edu

Accepted 30 September 2009

Objectives: To compare the new tax structure with the previous tax structure and to analyze the potential impact of the new tax structure.

Methods: Published government statistics and estimated price elasticities of the demand for cigarettes are used to estimate the impact of the new tax rate adjustment on cigarette consumption and population health.

Results: The new adjustment has increased the tax rate by 11.7% at the producer price level. Converting this 11.7% increase to the retail price level means an increase of 3.4% in the retail price tax rate. Thus the new Chinese cigarette tax rate at the retail level will be 43.4% instead of the previous 40%.

Conclusions: If the Chinese government does not pass along these additional taxes from the producer / wholesale level to the retail price, there will be no impact on tobacco control in China. It is hoped that the Chinese government will shift these taxes to the consumer, which would result in 1 million smokers quittng smoking and 250,000 quitters avoiding smoking-related premature death.

What this paper adds: This paper provides an up-to-date policy analysis of the new Chinese tobacco tax rate adjustment.

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