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China's new e-cigarette tax could fatten gov't coffers by USD1.2 billion, academic says 2022-10-30
China’s New E-Cigarette Tax Could Fatten Gov’t Coffers by USD1.2 Billion, Academic Says
China’s new consumption tax on vaping devices, due to come into effect on Nov. 1, will bring in around CNY9 billion (USD1.2 billion) a year in additional tax revenue, an associate professor at the Northwest University of Political Science and Law told Yicai Global.
Based on last year’s retail sales and imports, the new tax will generate around CNY9 billion in annual revenue, Xi Xiaojuan said. It will boost the nation’s coffers at a time when tax revenue is falling amid outbreaks of Covid-19.
The import and manufacturing of e-cigarettes will be taxed at a rate of 36 percent and wholesale distribution is set at 11 percent, the Ministry of Finance, General Administration of Customs and the State Taxation Administrtion said on Oct. 25. This is still less than that of tobacco-filled cigarettes which are taxed at a composite rate of 66.6 percent.
The price of vaping devices will go up once the consumption tax is introduced, which will help curb the habit among the country’s youth, experts told Yicai Global. China’s e-cigarette sales surged 36 percent last year from the year before to CNY19.7 billion (USD2.7 billion), while imports climbed 8.9 percent to CNY5.7 billion.
China will gradually move the target of consumption tax to the consumer end and let the tax become an important source of revenue for local governments, said Shi Zhengwen, a member of the China University of Political Science and Law.
China levies consumption tax on special consumer goods, such as cigarettes, alcohol, refined oil products and cars, that are highly-polluting and energy-intensive commodities, use non-renewable resources or are luxuries in order to curb consumption. It has now expanded the scope to include e-cigarettes.
Since 2014, there have been a number of changes in consumption tax rates. For example, the rate for refined oil products has been hiked three times, the rate for cigarettes was increased in 2015 and super luxury cars were included at a rate of 10 percent in 2016.
Source: Yicai
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