Abstract: Global experience has demonstrated that tobacco tax and price policy is the most effective single measure to reduce tobacco consumption, while the effectiveness of cigarette excise tax on tobacco use is limited in China because the increased tax can’t be shifted to retail price under existing mechanism of tobacco monopoly system and excise tax included in price. Although the cigarette excise tax adjustment in 2009 hasn’t brought much impact on cigarette price for given cigarette brand and specification, it has had much impact on tobacco industry’s behavior and has changed cigarette supply structure dramatically, and thus has raised cigarette average retail price and overall tax share. China needs further actions on increasing tobacco tax and cigarette price since cigarette price and tax share in China is still lower than global level. Future tobacco excise tax adjustment needs to lean on specific tax and impose uniform ad valorem tax on all cigarettes instead of tierd tax rate. The most effective way to shift increased tax to cigarette retail price under current monopoly system is to collect excise tax at retail level instead of produce level. It’s also necessary to make an inter-government transfer payment mechanism to make up the provincial revenue loss induced from raising tobacco excise tax.
Keywords: Tobacco Tax, Tobacco Control, Excise Tax Included in Price,
Tobacco Monopoly, Cigarette Pricing Mechanism
source:Finance & Trade Economics ,No.3,2013