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China Raises Tobacco Tax In Bid To Cut Smoking

by Mary Swire, Tax-News.com, Hong Kong

24 June 2009

The Chinese government has raised the consumption tax levied on packets of cigarettes by 6-11% in a double-edged attempt to reduce smoking and increase revenues.

According to the country's State Administration of Taxation, the new tax rates - along with the introduction of a 5% levy on tobacco wholesalers - came into effect on May 1, but have only just been officially announced.

The changes mean that tax on the most expensive brands of cigarettes has risen from 45% to 56% per carton, with taxes on cheaper brands jumping from 30% to 36%.

Current figures estimate that China has around 350 million smokers, with around 1 million individuals dying from smoking-related illnesses each year.

The tax administration has predicted that by raising the tax levies on tobacco, the government stands to increase annual revenues by CNY30bn (USD4.3bn).

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