Smokers hit by double tax penalty

The government increased the tax on tobacco products on May 1, but informed the public only Saturday.

The tax on cigarettes costing 70 yuan ($10) or more per carton rose from 45 percent to 56 percent, while for products costing less than 70 yuan per carton the rate was increased from 30 percent to 36 percent.

The tax on cigars went up from 25 percent to 36 percent, and all tobacco products are now subject to a value-added tax of 5 percent, the Ministry of Finance and the State Administration of Taxation said.

“The move aims to moderately increase fiscal revenue and perfect the taxation mechanism,” the document said without elaborating.

Tax revenue fell 6.7 percent to 2.7 trillion yuan in the first five months of this year, according to the ministry’s figures.

“Increasing the tax will help increase government income and save lives,” Li Ling, a professor from the China Center for Economic Research of Peking University, said.

“China lags behind other countries in terms of the level of tax on tobacco products,” he said.

Zhou Yangmin, from the Zhengzhou Youngman Management Consulting Company in Henan Province, told the Global Times the valued-added tax was new.

“It will ease the criticism of the tobacco industry,” he said.

“The tax on the wholesalers will now be up to 20 percent.”

Raising taxes has only a limited effect on the cigarettes online buy, he said.

“The price of cigarettes may influence the young and people on low incomes, but for wealthier people, the tax increase will have little impact,” he said.

“If prices go up, I’ll just buy cheaper brands rather than quit,” a 25-year-old smoker surnamed Chen from Beijing told the Global Times.

“I wasn’t told anything about the tax increases,” Zhang Zhikao, a tobacco retailer in Beijing, told the Global Times.

“Since the financial crisis, people have been buying fewer and cheaper cigarettes. Brands that cost less than 10 yuan a pack, such as Baisha and Zhongnanhai, are the most popular but we’re limited on how many we can get from the local tobacco company.

“If prices go up again in the future, I’ll find it hard to survive,” he said.

China had nearly 350 million smokers in 2007, according to the Ministry of Health.

Source: Global Times

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