Ministry of Health: Over 1 Million Annual Deaths in China Linked to Traditional Tobacco
1 trillion in tax revenue and 1 million deaths in China: New proposal for tobacco tax increase
Special contributor to Consumer Reports / Xiao Dan (Author is the deputy leader of the Tobacco Disease Group of the Respiratory Disease Branch of the Chinese Medical Association, professor at Beijing Institute of Respiratory Diseases, and doctoral supervisor)
In 2014, the tobacco industry in China generated 1 trillion yuan in tax revenue, which indeed made a significant contribution to the government’s finances, but the accompanying issues of public health and social economic development are deeply contradictory.
According to data from the Chinese Ministry of Health in 2012, the annual death toll from tobacco-related diseases in China exceeds 1 million. If the smoking epidemic is not controlled, the annual death toll could exceed 3 million by 2050.
The road to tobacco control is long, and the formulation and guidance of government policies are crucial.
Tax increases have both benefits and drawbacks
"The reason for controlling tobacco is health, not economic arguments, but often economic arguments are used to block tobacco control policies," said former WHO Director-General Gro Harlem Brundtland.
Long-term research results indicate that increasing tobacco taxes is the most cost-effective means of controlling tobacco use. However, many governments are concerned that tobacco control measures may lead to adverse economic consequences, such as reduced tax revenue due to decreased demand and increased illegal activities, and reduced employment opportunities in production, cultivation, and retail sectors.
Evidence shows that a well-managed tobacco tax system can achieve ideal results in reducing tobacco consumption and tobacco-related diseases, and will not produce the dire economic consequences described by the tobacco industry.
In fact, increasing tobacco taxes and prices can bring more fiscal revenue to the government for public expenditures such as healthcare. This win-win outcome, which can reduce tobacco consumption while increasing government revenue, is particularly attractive to governments that are financially strapped and urgently seeking new fiscal income to meet the growing rigid demands such as healthcare expenditures.
For the government, tobacco tax is a simple and effective revenue-raising tool that does not negatively impact the economy.
According to estimates by the World Health Organization, a 10% increase in tobacco product prices in low- and middle-income countries can reduce tobacco use by 5%. This effect is particularly pronounced among price-sensitive youth: after tobacco prices increase, their consumption decreases 2-3 times more than that of adults.
In China, if the price of a pack of cigarettes is increased by 1 yuan (approximately $0.16), the annual consumption of cigarettes could decrease from 125 billion packs to about 100 billion packs (a reduction of about 20%), increasing tax revenue by over 200 billion yuan (approximately $30 billion, an increase of over 30%) and saving countless lives.
Existing evidence from developed countries and emerging data from developing countries indicate that the economic concerns that prevent decision-makers from taking action are largely unfounded. Despite these concerns, over 170 countries have expressed a firm commitment to tobacco control, becoming parties to the WHO Framework Convention on Tobacco Control (hereinafter referred to as the "Convention") and implementing its provisions. Article 6 of the Convention clearly stipulates measures regarding tobacco taxation and pricing.
In 2008, the WHO launched the "MOPWER" series of tobacco control strategies, with the "R" representing "Increase Tobacco Taxes." China signed the Convention in November 2003. The Convention officially took effect in China in January 2006.
In May 2009, the Ministry of Finance and the State Administration of Taxation jointly issued a notice on adjusting the consumption tax policy for tobacco products, raising the ad valorem consumption tax rate for Class A cigarettes from 45% to 56%; and for Class B cigarettes from 30% to 36%.
Additionally, a new ad valorem tax was imposed at the wholesale level for cigarettes, with a tax rate of 5% of the wholesale price. However, it must be noted that China still has a long way to go in increasing tobacco taxes. The WHO recommends that consumption taxes should account for at least 70% of the retail price of cigarettes, while in China, this proportion is far below that, only accounting for about 40% of the price.
May 31, 2014, was the 27th World No Tobacco Day initiated by the WHO, with the theme "Increase Tobacco Taxes." Increasing tobacco taxes and raising cigarette prices is a win-win tobacco control measure that can increase national fiscal revenue while controlling tobacco prevalence and reducing health harms to smokers.
The "invisible" cost
As consumers of tobacco products, smokers pay the price of sacrificing their own health while enjoying the "pleasure" of relieving their nicotine cravings.
The harms of tobacco are one of the most serious public health issues in the world today, with 6 million deaths annually due to smoking, exceeding the combined deaths from AIDS, tuberculosis, and malaria.
A large body of evidence indicates that smoking can damage nearly all organs of the human body. Furthermore, the secondhand smoke produced by smokers also poses a significant threat to non-smokers nearby. However, the health hazards of smoking often take ten years or even decades to fully manifest.
China is the largest producer and consumer of tobacco in the world, with over 300 million current smokers and approximately 740 million non-smokers suffering from the harms of secondhand smoke.
The smoking characteristics of young and middle-aged smokers in China are very similar to those of smokers in Western countries. Due to the lagging effects of smoking hazards, it can be expected that they will face far greater smoking-related harms in the future than the current middle-aged and elderly population.
