Chinese Dealers Start Hoarding Tobacco

Last month, the Chinese government announced plans to increase the tobacco tax this year.

January 12, 2011

BEIJING - Chinese tobacco dealers have started socking away cigarettes ahead of a probably increase in tobacco taxes, the Global Times reports. The State Administration of Taxation (SAT) announced last month that the government would jack tobacco taxes this year to curb tobacco use.

"Wholesale purchases of most cigarettes have soared since September and some of the best-selling brand cigarettes are in short supply," said one tobacco store owner in Kunming, Yunnan Province.

Raising tobacco taxes is seen by some as the most effective way to control tobacco consumption, but other experts, including some smokers, don??t think tobacco tax hikes work all that well.

Tax rises for tobacco products are believed by some to be an effective method of tobacco control. However, some experts, as well as smokers, have cast doubts over the effectiveness of such a move.

A researcher with the Taxation Research Institute, which has ties to SAT, said cigarette prices were not increased much after the last tax hike because tobacco companies bore the burnt of the increase. In May 2009, China increased its tobacco tax by 56 percent.

Even if the tobacco companies absorb another tax hike, eventually the increase will trickle down to consumers, said researcher Hu Linlin with the China Tobacco Tax Research Group. "The government might apply unyielding administrative measures to raise cigarette prices in order to strengthen controls on smoking," he said.

On Monday, the Chinese health ministry acknowledged that the country had many miles to go in tobacco control.

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