WHO urges tax hike on tobacco

China's tobacco tax rate is still among the world's lowest, and the government should increase it to help curb a smoking epidemic that afflicts more than 300 million people on the mainland, according to the World Health Organization.

About half of Chinese smokers spend 5 yuan (80 US cents) or less on a pack of 20 cigarettes, which is "much, much lower than the average cost in developed countries," said Angela Pratt, technical officer of the Tobacco Free Initiative in the WHO office in China.

Pratt made her remarks at a media briefing to prepare for Friday's launch of the Chinese-language translation of the WHO Technical Manual on Tobacco Tax Administration.

According to the manual, which was first published in 2010, total taxes on cigarettes account for about 50 percent of the average retail price for cigarettes at the global level, with the average price of a packet being $2.53. The lower-middle-income countries have both lower tobacco prices and lower rates of tobacco taxation.

The excise tax rate in China is 36 percent or 56 percent for cigarettes with different factory prices, official statistics show.

"Designing tobacco taxes that deliver on the objectives of reducing smoking rates and increasing revenue to governments, there is a bunch of technical work that goes into that. This document has been designed to assist policymakers in government to do that," Pratt said. "Our intention in translating the document is to make the information accessible to officials and others in China."

Pratt said China is considered to be a middle-income country, but the price of its tobacco products fits more into the lower-middle-income group.

Also, data from the WHO show that the average annual per capita income required to buy 100 packets of the cheapest cigarettes in China has dropped from 14 percent in 2000 to 3 percent in 2010.

"As China's economy has been growing rapidly over the past two decades, the price of cigarettes has not grown at a commensurate rate, which means cigarettes, already cheap, have become more affordable over time," she said.

Helen Yu, public information officer of WHO China, agreed, saying the manual recommendations are based on the best practices around the globe.

WHO has recommended that at least 70 percent of the retail price of cigarettes come from excise taxes to effectively reduce tobacco consumption, yet it says the excise tax accounts for only about 25 percent in tobacco's retail price in China.

Liang Ji, associate professor of the Research Institute for Fiscal Science under the Ministry of Finance, said there is plenty of room for further tax hikes.

In 2009, Chinese authorities hiked tobacco taxes by at least 6 percent, mostly on relatively expensive brands.

"But that didn't affect cigarette retail prices, particularly the low-end brands, as tobacco companies chose to absorb the tax increase to maintain consumers," she said.

To address that, Liang suggested the taxation authority keep raising the tax to squeeze the profit margins of tobacco producers as much as possible until they increase retail prices.

China set up a State monopoly of the tobacco industry in the early 1980s, and it now produces more than 2.3 trillion cigarettes each year, accounting for 40 percent of the world's total, official statistics showed.

During the past 10 years, the industry has contributed 7 to 10 percent of the total annual central government revenues, official statistics showed.