A new consumption tax levied on e-cigarettes in China is expected to raise an additional RMB10 billion (US$1.37 billion) for the government. Photo credit: Peakpx
Starting November 1, e-cigarettes will be subject to taxation on an ad valorem basis under China’s new regulations, authorized by the Ministry of Finance, General Administration of Customs, and the State Taxation Administration. Production (imports) will be taxed at a rate of 36%, while wholesale will be taxed at a rate of 11%.
According to the Global Times, this new measure will improve the consumption tax system, maintain a fair and uniform tax system, and use the tax to guide healthy consumption. E-cigarette exporters will continue to follow the export tax refund and exemption policy, encouraging e-cigarette exports.
Domestic e-cigarette sales revenue is around RMB20 billion. The consumption tax is expected to contribute RMB10 billion to the government’s coffers. With cigarette sales accounting for around 5% of the central government's annual tax revenue, tobacco products continue to be a significant source of income for Beijing.
Pan Daily reports that the new tax policy will not affect the many businesses in the e-cigarette sector that are focused on exporting. Additionally, some e-cigarette companies' stocks have increased significantly as a result of China encouraging them to export their goods in order to gain foreign exchange.
Following the government’s announcement on October 25 of the consumption tax, the share price of RLX Technology, was trading at US$1.14 per share, up 14% with the greatest intraday increase of 15%. Smoore International saw its stock price close higher on the same day at 4.77%.