Raising tobacco tax would save lives

Smoking-related illnesses and deaths are a serious threat to China's future health and prosperity. But this threat can be reduced with strong policy action to reduce smoking rates.

Of all the alarming statistics about smoking in China, there is one that stands out. That is, without action to reduce smoking rates, of the 300 million boys and young men up to the age of 29 in the country at present, 100 million will die a premature death because of tobacco. That means one in every three boys who are currently sons, grandsons, brothers, school children; and one in every three young men who are fathers, colleagues, friends will die before their time.

One of the most effective mechanisms governments around the world have used to reduce the number of people who smoke is raising the tax on tobacco. Increasing the retail price of tobacco using taxation can reduce tobacco consumption by encouraging existing smokers to quit, reducing the number of cigarettes smoked per person, and stopping people - especially young people - from starting to smoke.

Cigarettes are very cheap in China, 50 percent of smokers spend about 5 yuan (80 US cents) or less on a pack of 20 cigarettes. The average cost of a packet of cigarettes in developed countries is much higher due to the heavy taxes imposed on tobacco products.

The unprecedented economic growth in China over the last two decades means tobacco has actually become even more affordable, as incomes have increased faster than the price of cigarettes. In 2000, buying 100 packets of the cheapest cigarettes would require nearly 14 percent of the average annual per capita income; in 2010 it required less than 3 percent of the average annual per capita income.

The World Health Organization's Framework Convention on Tobacco Control, to which China is a party, is an evidence-based treaty that reaffirms the right of all people to the highest standard of health. It recommends that countries increase tobacco taxes taking into account their national health objectives concerning tobacco control. Further, as a best practice, WHO recommends that at least 70 percent of the retail price of cigarettes come from excise taxes. The effective rate of taxation as a proportion of the retail price of tobacco in China is significantly lower - between 30 and 40 percent, according to most estimates.

Increasing tobacco taxes would not only save lives and reduce the country's healthcare costs, it would also benefit the government by creating additional revenue, without hurting the economy.

Data compiled by professor Rong Zheng at the University of International Business and Economics in Beijing and professor Teh-Wei Hu at the University of California in the United States show that a modest increase in tobacco tax, if passed onto the retail price of cigarettes, would raise billions in additional revenue for the government and save hundreds of thousands of lives.

A 1 yuan increase in the price of each pack of cigarettes could decrease the consumption of cigarettes in China by 3 billion packs a year, reduce the number of smokers in the country by 3.42 million and increase the government's annual revenue by 97.5 billion yuan to 129 billion yuan. That is billions of dollars of additional revenue that could be reinvested for the benefit of the people of China.

A tobacco tax increase that raises the retail price of cigarettes would be a "win-win" for China, not least for those millions of boys and young men whose lives will otherwise be lost because of this killer.

The author is WHO representative in China.

(China Daily 11/15/2012 page9)