If you can't stop 'em, tax 'em

Opinion / Ravi S. Narasimhan

 If you can't stop 'em, tax 'em
By Ravi s. narasimhan (China Daily)
Updated: 2006-02-10 05:34

China, you have to admit, is a great place if you're a smoker.

You can light up virtually anywhere without a qualm. No one gives you
dirty looks, or a second glance, if you smoke in a restaurant or bar. In
fact, most restaurants thoughtfully stock cigarettes in case you run out.

At a Thai restaurant in an upmarket Beijing shopping centre, I saw two
guys nonchalantly puffing away right under the "No Smoking" sign at the
only, token table for non-smokers.

Restaurants are not the only place where this laissez faire attitude is
so evident.

If you've never been to a Chinese wedding reception, here's a glimpse:
Perched right at the centre of the round table as if taking pride of
place are, usually, a couple of open, expensive cigarette packets.

Expensive is the operative word here because only in China you have a
wide array of brands catering to the super rich.

And unlike in other places, if you offer someone a cigarette here, he
(male smokers outnumber women by a hefty margin) would accept it as a
matter of courtesy.

Is it any wonder that one-third of the world's smokers are in this
country?

Is it surprising to find one-third of the tobacco grown globally comes
from China?

And is it shocking to find Hongtashan is the second-most recognizable
domestic brand (for those not in the know, it's a cigarette) in the
country?

To top it all, prices are low by international standards.

But what price are we paying for all of this?

The great damage wrought by tobacco is too well-documented and well-known
to repeat; just one figure will do: Smoking-related diseases kill about 1
million people in China every year according to the Centre for Disease
Control and Prevention. The number could jump dramatically, warn experts.

It's not as if the government is unaware of the dismal picture. On
Tuesday, a senior Chinese diplomat told a WHO tobacco control conference
in Geneva that the country would not approve any new cigarette factories,
control smoking in public areas and strengthen regulation of tobacco
production and business.

China will also continue to impose strict restrictions on tobacco
advertising, forbid sales to minors and ban the use of cigarette-vending
machines, the conference was told.

The government, however, cannot wish away the entire industry: Tobacco
taxes and profits last year amounted to 240 billion yuan (US$30 billion)
a whopping 13 per cent of total tax revenues for the central government.
Tobacco accounts for about 40 per cent of total revenues in Yunnan; and
the industry employs hundreds of thousands nationwide.

So, can a balance be struck?

A 2002 research paper shows that tax, on average, for a retail price of a
packet of cigarettes was 38 per cent in China, compared with 63 per cent
in the Philippines and 60 per cent in Japan.

What if the tax on cigarettes were doubled?

Taking into account economic niceties like price elasticity and reduced
profits for the tobacco monopoly, last year's tobacco tax of about 160
billion yuan (US$20 billion) could conceivably go up to 240 billion yuan
(US$30 billion).

To put that in perspective, the central government's expenditure on
public health in 2002) was 86.4 billion yuan (US$1.8 billion) according
to the latest figure available from the National Bureau of Statistics
yearbook.

If all the extra tax revenue generated went into public health spending,
the budget would be up a staggering five-fold.

Now, that would be enough to try and treat even smoking-related illnesses.

Email: ravi@chinadaily.com.cn

(China Daily 02/10/2006 page4)

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