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Research paper
The role of taxation in tobacco control and its potential economic impact in China
  1. Teh-wei Hu1,2,
  2. Zhengzhong Mao3,
  3. Jian Shi4,
  4. Wendong Chen5
  1. 1Health Economics, University of California, Berkeley, California, USA
  2. 2Center for International Tobacco Control, Public Health institute, Oakland, California, USA
  3. 3Department of Health Economics, Sichuan University, Chengdu, China
  4. 4Research Institute of Taxation Science, State Administration of Taxation, Beijing, China
  5. 5Taxation Branch Institute, State Administration of Taxation, Beijing, China
  1. Correspondence to Teh-wei Hu, School of Public Health, Room 241 University Hall, University of California, Berkeley, California 94720, USA; thu{at}berkeley.edu

Abstract

Objectives To identify key economic issues involved in raising the tobacco tax and to recommend possible options for tobacco tax reform in China.

Methods Estimated price elasticities of the demand for cigarettes, prevalence data and epidemiology are used to estimate the impact of a tobacco tax increase on cigarette consumption, government tax revenue, lives saved, employment and revenue loss in the cigarette industry and tobacco farming.

Results The recent Chinese tax adjustment, if passed along to the retail price, would reduce the number of smokers by 630 000 saving 210 000 lives, at a price elasticity of −0.15. A tax increase of 1 RMB (or US$0.13) per pack of cigarettes would increase the Chinese government's tax revenue by 129 billion RMB (US 17.2 billion), decrease consumption by 3.0 billion packs of cigarettes, reduce the number of smokers by 3.42 million and save 1.14 million lives.

Conclusion The empirical economic analysis and tax simulation results clearly indicate that increasing the tobacco tax in China is the most cost-effective instrument for tobacco control.

  • Tobacco taxation
  • economic impact
  • China, economics
  • taxation and price
  • tobacco products

https://doi.org/10.1136/tc.2009.031799

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    Footnotes

    • Funding US National Institutes of Health, Fogarty International Center (R01-TW05938) and the International Union Against Tuberculosis and Lung Disease.

    • Competing interests None.

    • Provenance and peer review Not commissioned; externally peer reviewed.