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The Role of Taxation in Tobacco Control and Its Potential Economic Impact in China

In: Economics of Tobacco Control in China From Policy Research to Practice

Author

Listed:
  • Teh-wei Hu
  • Zhengzhong Mao
  • Jian Shi
  • Wendong Chen

Abstract

Objectives To identify key economic issues involved in raising the tobacco tax and to recommend possible options for tobacco tax reform in China.Methods Estimated price elasticities of the demand for cigarettes, prevalence data and epidemiology are used to estimate the impact of a tobacco tax increase on cigarette consumption, government tax revenue, lives saved, employment and revenue loss in the cigarette industry and tobacco farming.Results The recent Chinese tax adjustment, if passed along to the retail price, would reduce the number of smokers by 630 000 saving 210 000 lives, at a price elasticity of −0.15. A tax increase of 1 RMB (or US$0.13) per pack of cigarettes would increase the Chinese government's tax revenue by 129 billion RMB(US 17.2 billion), decrease consumption by 3.0 billion packs of cigarettes, reduce the number of smokers by 3.42 million and save 1.14 million lives.Conclusion The empirical economic analysis and tax simulation results clearly indicate that increasing the tobacco tax in China is the most cost-effective instrument for tobacco control.

Suggested Citation

  • Teh-wei Hu & Zhengzhong Mao & Jian Shi & Wendong Chen, 2016. "The Role of Taxation in Tobacco Control and Its Potential Economic Impact in China," World Scientific Book Chapters, in: Teh-wei Hu (ed.), Economics of Tobacco Control in China From Policy Research to Practice, chapter 9, pages 149-168, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813108721_0009
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