Is cigarette tax increase in China necessary and feasible?

Presenter: Yuanli Liu, Harvard University

Abstract

China is undergoing a major health care reform. Regardless of what concrete forms the new system would take, it is estimated that the government would need to put in about 200 billion yuan (US$25 billion) new money per year to ensure universal access to a package of essential healthcare services. Given the strained source of current health financing as well as the serious need to control tobacco consumption, an earmarked cigarette tax is necessary to help finance China’s on-going healthcare reform and advance public health. In addition to the necessity analysis, this paper will analyze China’s feasibility of cigarette tax increase in three aspects: political, economic and social. The Chinese government is emphasizing its commitment to scientific concept of development and building a harmonious society, which creates a favorable political environment for cigarette tax increase. Meanwhile, current prices of cigarettes are low and cigarette tax as percentage of government revenue has been declining thanks to China’s rapid economic growth. The social feasibility will be studied through a public opinion survey about the cigarette tax increase.