China to Increase Taxes on Cigarettes

China to Increase Taxes on CigarettesChina is planning to raise taxes on cigarettes further in hopes to reduce the use of tobacco and increase revenue that can be used to finance the health and medical sectors  as the added tax wil expected to bring in 87 billion in revenue for the government.

Last Friday the Ministry of Finance increased the consumption tax on wholesale price of cigarettes to 11 percent up from 5 percent. Cigarettes are now taxed at 0.005 yuan each. Change the tax scheme took effect on Sunday. This will be the first increase since May 2009 as taxes on top branded cigarettes was raised to 56 percent from 45 percent. Cigarettes are cheap in China and it was time to raise the prices of cigarettes through tax. A tobacco store in Beijing said cigarette prices sold at the store increase by 10 percent over the weekend thus a pack of 25 yuan cigarette is now sold at 27 yuan. But even with the added tax business went on as usual which means the tax addition is not enough to deter smokers.

From 2000 until 2012 the price index for cigarettes in China increased by 3 percent. Based on a increase in income cigarettes are now 70 percent cheaper and is more affordable than before. In contrast food prices double during the same period and liquor prices went up by 140 percent. Expert say that the price of cigarettes in only catching up with other prices and there is still a need to increase its tax further.

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