Tobacco tax increase results in decreased tobacco consumption

News release

One year after China’s Ministry of Finance announced an adjustment to tobacco taxation in China, tobacco prices are up and the overall volume of tobacco consumption in China is down – according to results from the World Health Organization’s (WHO’s) analysis of the tax increase, released today.

“Following the tax increase announced on May 8 last year and a series of other tobacco control policy developments, WHO estimates that the total number of cigarettes sold in China fell by 3.3% between April 2015-March 2016, compared to the same period (April 2014-March 2015) the previous year,” said Dr Bernhard Schwartländer, WHO Representative in China.

The decrease in total volume included a 5.5% reduction in total sales in the cheapest class of cigarettes – indicating that it is low-income smokers who have reduced cigarette consumption the most.

“This is good news, because it is people in the lowest socio-economic groups in China who are most profoundly affected by the health and economic burdens caused by smoking. Tobacco use, and in particular, the cost of tobacco-related illness such as lung cancer, can plunge people and families into poverty, and make it impossible for others to escape it,” Dr Schwartländer said.

WHO’s analysis also shows that the retail prices of cigarettes increased by around 10% on average, with the price of the cheapest brands increasing by as much as 20%. Last year’s tax increase set the important precedent in China that tobacco tax increases should be passed on to the retail price of cigarettes, in order to achieve the public health objective of reducing tobacco consumption.

“Increasing tobacco taxes and prices is the single most effective way of reducing tobacco consumption in the short term. The 2015 tax increase was an important step in the right direction, but only one step. Cigarettes are still incredibly cheap in China – which means they will become more affordable over time unless there are further, regular tax increases,” Dr Schwartländer explained.

“We must build on last year’s reform to take more steps towards reducing tobacco consumption through further tax increases – because the higher the price, the more lives that will be saved,” Dr Schwartländer said.

The 2015 tax increase also contributed to approximately 70 billion RMB (around $11 billion USD) in additional tobacco related tax revenue to the central Government in 2015, compared with 2014.

“This demonstrates how tobacco tax increases are the classic win-win policy for governments – they help deliver both an important public health objective, as well as generate additional revenue for government to invest in other priorities such as health reform. Tobacco taxes – and tobacco control policies more generally – are good for health, and they are good for the economy,” Dr Schwartländer concluded.

Note to editors:

WHO’s analysis quoted above was prepared by the WHO Collaborating Centre for Tobacco Control Economics at the University of International Business and Economics (UIBE), Beijing.

About the World Health Organization (WHO):

WHO is the directing and coordinating authority for health within the United Nations system. It is responsible for providing leadership on global health matters, shaping the health research agenda, setting norms and standards, articulating evidence-based policy options, providing technical support to countries and monitoring and assessing health trends.

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Ms WU Linlin
WHO China Office
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