China raises tobacco tax to curb smoking

China has raised taxes on tobacco by six to 11 percent in an effort to pad state coffers and curb smoking in the world’s largest cigarette market, according to the government and state press.

Tobacco wholesalers have also been hit with a five percent levy according to new tax rates that went into effect on May 1 but were announced over the weekend, the State Administration of Taxation said in a notice on its website.

“Efforts to increase the tobacco tax and lift tobacco prices have proven the most effective in reducing smoking among smokers of all income levels,” the China Daily quoted the Chinese Association of Tobacco Control as saying Monday.

“It will prevent young people from smoking and encourage more smokers to quit the harmful habit.”

Tax on more expensive brands of cigarettes went up from 45 percent to 56 percent per carton, while the tax on cheaper tobacco saw an increase to 36 percent from 30 percent, the administration said.

China is the largest producer and consumer of cigarettes in the world with up to a million people dying of smoking-related diseases each year, the China Daily said. This figure could rise to up to three million by 2050, it added.

The Asian giant has a total of 350 million smokers and a growing army of young people are picking up the habit, it added. Half of all male Chinese smoke, it said.

The tax administration said the new levies would “moderately improve” revenues, while the China Daily said the move would add up to 30 billion yuan (4.4 billion dollars) annually to state coffers.

China’s government has said it expects a record deficit this year due to efforts to fund a 585-billion-dollar stimulus package to offset the global financial crisis.

State revenue, meanwhile, declined 6.7 percent year-on-year in the first five months of 2009, the report said.