Dilemma of tobacco

Above about tobacco

Industries, while many continue to suffer negative growth, despite all efforts to revive the economy in full swing, the profits of tobacco companies to allow the Chinese to pay 513.11 billion yuan (75.13 billion U.S. dollars) in taxes in 2009, year-on -on-year increase of 12.2 percent. The data was released Zhang Xiulian, a spokesman for the State tobacco monopoly office (STMB), in a press conference in Beijing on 14 January. Tax allowance for the tobacco industry China's tax revenues increased by 1 percentage point from 7 percent in 2008 to 8 percent in 2009.
High tax burden
Increase in excise duty on cigarettes is one of the most effective tobacco. A price increase of cigarettes, young people and those of lower income groups may be less likely to start smoking, or at least reduce smoking, to save money. For this reason, China has levied heavy taxes on the tobacco industry.
Before 1994, the rate of output growth for the tobacco industry, which used to be the same as those imposed on other sectors. Then, in 1994 the Chinese government sets split the tobacco industry led vz-added tax and excise tax. Tobacco products have become an important part of indirect taxes, all factories were taken from the cigarette excise tax to 40 percent of the cost price.
China adopted in 2001 tax measure, the combined ad valorem and specific method of calculating the amount of duty payable on tobacco products. Under this method, 150 yuan ($ 21.96) will be used for each 50,000 cigarettes. Moreover, the Government of cigarettes divided into two categories: Category A and Category B-ad valorem taxes on themselves. Category applies to cigarettes in terms of transfer pricing within the company for 200 cigarettes, are more than 50 yuan (7.32 dollars), leading to an ad valorem tax rate of 45 percent. Category B applies to cigarettes, the ceremony within the company for 200 cigarettes, are less than 50 yuan ($ 7.32) and ad valorem tax rate is 30 percent.
In June 2009 the government has readjusted its tax policy on tobacco, raising the standard, which separates the group and group B from 50 yuan to 70 yuan ($ 10.25) to 200 cigarettes. Ad valorem tax rate for the class increased from 45 percent to 56 percent, while group B increased from 30 percent to 36 percent.
High fiscal policy turned the tobacco industry in the main source of tax revenue in China and the backbone of tax revenue for some local governments. Yunnan Province like Hunan and Guizhou are among the most important tobacco plants in China and the foundations of transformation. In 2006, the tobacco industry in Yunnan taxes paid 39.09 billion yuan (5.72 billion U.S. dollars), representing 48.81 percent of total tax revenues of the province. In Hunan, the figures were 20.9 billion yuan (3.06 billion U.S. dollars), and 28.94 percent, and Guizhou, 8.64 billion yuan (1.27 billion U.S. dollars), and 22.96 percent, respectively.
Despite the high tax policies, the tobacco industry was able to expand rapidly with more than 60 tobacco companies currently operating in China. Among China's top 500 companies in 2009, nine were from the tobacco industry.
External factors
Tobacco industry is one of the few sectors in China open to foreign investors. Tobacco industry is a government monopoly in China, more oversight power management STMB whose job it is right to reduce the consumption of tobacco products and production organization and management of tobacco monopoly. By the end of 2009, were 4.95 million from the tobacco shops in franchising in China.
But there are exceptions to the centralized and unified monopoly, to facilitate smokers'. With the foreigners coming to China, a growing number at the end of 1970, may not find many international brands like cigarettes. To meet the demand for foreign workers, tourists and overseas Chinese, the Chinese government allowed its control over tobacco products and began to allow shipping, sales of international brands of cigarettes interiors business. Concurrently, the country holding the reins firmly on the influx of foreign brands in China through the issuance of import permits and collection of duties and taxes for this product.
China also views the establishment of a joint venture cigarette factories, which produce foreign brands of cigarettes. On 4 September 1986, was established Huamei Cigarette Co Ltd. Jointly established by the province of Fujian-based Xiamen Cigarette Factory and RJ Reynolds Tobacco Co. in the United States was the first cigarette joint venture on the Chinese mainland since 1949. With a total investment of 21 million U.S. dollars (each party holding 50 per cent), the deadline for co-operation was set at 18 years.
To 18-year period of joint ventures, Huamei produced 883,200 boxes of cigarettes from Golden Bridge, Camel, pay taxes to 2.56 billion yuan (374.82 million U.S. dollars) and record profits of 957 million yuan (140.12 million U.S. dollars).
After a cooperation agreement expired in September 2004, the Parties agree to transfer their holdings in Huamei Cigarette Factory in Xiamen. Huamei was later renamed the Golden Bridge Production Center Xiamen Cigarette Factory.
During the period Huamei joint venture, which made changes to the system for shipment to foreign cigarettes. After China reformed its tax rate in 1994 and then reformed the exchange rate mechanism, by many foreign cigarettes was almost at a standstill. Situations to learn from China to the international practice and enable the production of the famous foreign brands of cigarettes with the term "licensed production."
Production license allows the manufacture and sales of foreign brands of cigarettes in China, under certain conditions. Signs and fee must be paid to the technical guidelines for foreign companies in accordance with the volume actually produced. All products manufactured in China, however, can not be exported and cigarettes, these marks are not allowed to import more. Since no common Huamei Cigarette companies have been approved in China. Instead, the cooperation between the tobacco companies in China and abroad, mostly carried out under licensed production. Cigarette sales are still a state monopoly.
According STMB because tobacco products are special products and harmful to human health can not be manufactured and sold at random. Then China change its policy towards the single centralized and tobacco industry.
Active management
Although the tobacco industry has the opportunity to get a good tax revenue, the Chinese government will never hesitate to tobacco control. In 1986, China began to require that tobacco companies know that the tar on cigarette packs. Since then, standards for tar properly used, with some companies, even warning that "smoking is harmful to health." In 1990, China National Tobacco Corporation, that the cigarette companies to print health warnings on packaging of products, confirmed the legal requirement of the Chinese government in 1991.
People continue to develop awareness of the harmful effects of smoking, cigarette manufacturers have taken measures to control the quantity of content of tar and nicotine in their products, management of a safe level. In 2005, the Chinese government required tobacco companies to note the content of carbon monoxide in the case of cigarettes.
From 1 January 2009 to meet the requirements under the Framework Convention on Tobacco Control, China requires a warning shall cover at least 30 percent of cigarette packages.
Each year on World No Tobacco Day in May, the Chinese government has launched large-scale campaign to combat smoking. The government also prohibits tobacco manufacturers and retailers to send advertisements that contain names of tobacco companies and the names of tobacco products. Some tobacco companies adopt alternative measures to get publicity. Figures from the Chinese Association on Tobacco Control, showed that the September to December 2009, 52 donations from tobacco companies to 79 public services, cultural and sport covering 40 cities and counties in 15 provinces, autonomous regions and municipalities to support themselves, including gifts to Hope primary schools.
17 January 2010, the Association published a petition to the legislature in the country calling for a change in the law on tobacco as early as possible to prevent tobacco companies on the black market. It proposed a ban on tobacco advertising, sponsorship and donations of all forms.