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Tobacco Leaf Tax

The tobacco leaf tax is imposed on an entity that engages in the purchase of tobacco leaves (including aired tobacco leaves and baked tobacco leaves) within China, and shall be calculated on the basis of the sum as generated from tobacco leaf purchases at the tax rate of 20%. The taxpayer shall file the tax returns within 30 days upon the occurrence of the tax payment obligation. The prescribed time limit for paying the tax shall be determined by the competent tax authorities.

It shall be noted that, notwithstanding the 19 categories of tax provided for in the tax laws of China (including customs duty and tonnage dues), not every taxpayer has to pay all of them. Only if the taxpayers have the taxable activities specified by the tax laws, they are required to pay relevant taxes, and in case of no such taxable activities, they are not required to pay relevant taxes. According to actual situation, the enterprises with relevant larger scale and wider business scope may be involved with about 10 tax categories, while most of the enterprises only pay 6 - 8 tax categories.

Tobacco in China

Key facts

There are more than 300 million smokers in China, nearly one-third of the world's total.

About one in every 3 cigarettes smoked in the world is smoked in China. Nearly 2.3 trillion cigarettes were consumed in China in 2009 - more than in the other top-4 tobacco-consuming countries (Indonesia, Japan, the Russian Federation and the United States of America) combined.

According to the Global Adult Tobacco Survey (GATS) in China in 2010, nearly one-third (28.1%) of the population smokes, including 52.9% of men and 2.4% of women. More than half (52.7%) of smokers aged 20-34 years started smoking daily before the age of 20.

Approximately one million deaths every year in China are caused by tobacco - around one in six of all such deaths worldwide.

Approximately 100,000 people die as a result of exposure to second-hand smoke each year.2

In other words, someone in China dies approximately every 30 seconds because of tobacco use; or around 3000 people every day.

If the prevalence of tobacco use in China is not reduced, the number of tobacco-related deaths every year in China will increase to 3 million by 2050.3

Second-hand smoke

Second-hand smoke is a major challenge for China.

In a typical week, 70% of adults are exposed to second-hand smoke in one environment or another.

Exposure to second-hand smoke kills approximately 100,000 people every year.

Tobacco use is a risk factor for heart disease, cancer and other diseases

Tobacco use and exposure to second-hand smoke are significant risk factors for non-communicable diseases such as heart disease, cancer, and lung or respiratory tract diseases.

Half of all regular smokers will die prematurely as a result of their tobacco use.

Cancer

Tobacco smoke is a carcinogen: it can cause lung cancer, oral and pharyngeal cancer, laryngeal cancer, oesophageal cancer, stomach cancer, liver cancer, pancreatic cancer, kidney cancer, bladder cancer and cervical cancer.

The risk of developing lung cancer increases with the frequency and duration of smoking, and the younger the age at which smoking is taken up.

Worldwide, smoking causes nearly 80% of male and 50% of female lung cancer deaths, and 70% of lung cancer deaths overall.

Table of Consumption Tax: Taxable Items and Rates
Taxable itemsTax rates (tax amount)
1. Tobacco
(1) Grade A Cigarettes
(2) Grade B Cigarettes
(3) Grade C Cigarettes
(4) Cigars
(5) Cut tobacco

50%
40%
25%
25%
30%

Cardiovascular disease

Smoking and exposure to second-hand smoke can cause cardiovascular and cerebrovascular diseases such as heart attack, coronary and peripheral artery disease, and stroke.

In China, of men aged 30-44 years who die from cardiovascular disease, 46% of these deaths are attributable to tobacco.

Smoking is estimated to cause 10% of cardiovascular disease worldwide.

Other diseases and health risks

Smoking may cause complications for patients with Type 2 diabetes.

Smoking also increases the risk of some communicable diseases such as tuberculosis (TB) and pneumonia. Smoking is responsible for approximately 20% of global TB incidence. Worldwide, around 40 million smokers with TB will die between 2010 and 2050.

Smoking while pregnant harms the foetus, leading to low birth weight and other health problems for both the mother and baby, and may increase the risk of Sudden Infant Death Syndrome.

Health warnings

The WHO Framework Convention on Tobacco Control (FCTC) recommends that large and clear warnings appear on both the front and back of tobacco packets. They should describe specific illnesses caused by tobacco. Pictures, or graphic health warnings, have a greater impact than words alone, and are proven to be an effective means of increasing people's awareness of the harms of tobacco use.

Health warnings on cigarette packs in China carry only text warnings, not graphic health warnings.

Consequently, 63.6% of current smokers who noticed a warning label on cigarette packs did not think about quitting smoking, according to the 2010 Global Adult Tobacco Survey (GATS) conducted in China.

Affordability of cigarettes in China

The affordability of tobacco products is an important factor influencing smoking rates.

In China, in 2010 the retail price of the most sold brand of tobacco was US$0.74 (5 RMB). The average cost of a packet of cigarettes in developed countries is much higher.

According to academic studies, in 2000, nearly 14% of the average annual per capita income was required to buy 100 packets of the cheapest cigarettes; in 2010, the same number of packets could be purchased for less than 3% of average annual per capita income.

Tobacco taxation

Tobacco tax increases are widely regarded as one of the most effective measures for reducing tobacco consumption. This leads to higher retail prices for cigarettes, encouraging smokers to quit, increasing successful attempts at quitting, reducing the number of cigarettes each smoker smokes, and discouraging prospective new smokers from taking up the habit.

WHO recommends that at least 70% 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 around 40% for the most popular brand.

Tobacco control progress in China

China signed the Framework Convention on Tobacco Control (FCTC) in November 2003, and ratified the FCTC in January 2005.

China's 12th Five-Year Plan calls for smoke-free public places as part of the major national goal to increase life expectancy.

The "China Report on the Health Hazards of Smoking", released by the Ministry of Health in May 2012, outlines the hazards of tobacco use, states the health consequences of second-hand smoke, and emphasizes the importance of smoking cessation.

WHO's response

WHO is committed to fighting the global tobacco epidemic. The WHO Framework Convention on Tobacco Control entered into force in February 2005. Since then, it has become one of the most widely embraced treaties in the history of the United Nations, with more than 170 Parties covering 87% of the world's population.

In 2008, WHO introduced a package of tobacco control measures to further counter the tobacco epidemic and to help countries to implement the WHO Framework Convention. Known by their acronym MPOWER.

The six MPOWER measures are:

  • Monitor tobacco use and prevention policies;
  • Protect people from tobacco use;
  • Offer help to quit tobacco use;
  • Warn about the dangers of tobacco;
  • Enforce bans on tobacco advertising, promotion and sponsorship;
  • Raise taxes on tobacco. China and the FCTC.

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