Tobacco sales in China take hit from tax rises and luxury crackdown

China’s tobacco industry gasped for life in the first five months of the year, with sales taking big hits from tax increases and Beijing’s war on extravagance.

Revenue fell 11.7 per cent year on year from January to May and profits were down 24 per cent, according to the National Bureau of Statistics.

The release of the data on Monday came after a pledge last month by Ling Chengxing, head of the State Tobacco Monopoly ­Administration, to revive the industry and increase its tax contributions by more than 7 per cent this year.

Ling said that after a difficult 2015, the administration aimed to increase its payments to the national coffers at a rate slightly ahead of the country’s economic growth, according to a statement on the administration’s website.

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Last year, cigarette sales reversed years of growth to drop by 2.36 per cent. Despite that, the industry generated around 1.1 trillion yuan (HK$1.3 trillion) in profit and tax revenue, 8.7 per cent over 2014.

The administration is one of eight government agencies with the job of implementing the World Health Organisation’s Framework Convention on ­Tobacco Control.

Ling also heads China National Tobacco Corporation, the state-owned monopoly tobacco manufacturer.

With about 315 million smokers, the mainland is the world’s biggest producer and consumer of tobacco products. And roughly 700 million people are routinely exposed to second-hand smoke, according to the WHO.

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Tobacco control is difficult in the country because the industry has been the mainland’s top source of tax revenue since 1987, and those earnings have grown at double-digit pace since 2003.

Yang Gonghuan, tobacco control advocate and Peking Union Medical College professor, attributed the fall in sales to President Xi Jinping’s sweeping crackdown on extravagance.

“Luxury brands of cigarettes were mostly bought with public money for official receptions or gifts. The strict controls on government spending on banquets and gifts of high-end cigarettes have without doubt affected cigarette sales,” she said.

Yang said an increase in wholesale taxes in May last year also played a part.

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