The Reform Plan of Tobacco Excise: Who Benefit More for China?

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Feng Cui et al.

Abstract

It’s well-known that excise is highly relative to tobacco taxation and profit of tobacco industry. The aim of this study is to analyse the impact of reform plan of tobacco excise on taxation of the government and revenue of tobacco industry, and also to compare who will benefit more. Using publicly available statistics, this article analyzes the interest adjustment of reform plan, the TaXSiM model is employed to calculate tobacco taxation of provinces when excise levied moves from production link to marketing link, and estimate the effect of industrial agglomeration in tobacco industry. The results show that if excise reform plan is implemented, local governments will gain small amount of incremental taxation since tobacco is a commodity with restricted consumption, excise reform plan can’t bring new tax source for governments. Whereas excise reform plan is favourable for optimal allocation of resources and adjustment of internal structure in tobacco manufacturing link, which can bring great profit for industry. Therefore, the reform plan of tobacco excise is more beneficial for tobacco industry than local governments, and the tobacco control for China will become more arduous. 

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