By staff reporter Wang Changyong

(Caijing.com.cn) China has raised the tobacco tax to as high as 56 percent in a bid to  meet the central government's target of 9.8 percent fiscal revenue growth for 2009, according to the State Administration of Taxation (SAT).

The tax hike is effective May 1 but was announced only on June 19 in a notice on the SAT website.

The consumption tax on Class I cigarettes was raised to 56 percent from 45 percent, the SAT said. Class I cigarettes are those priced at 70 yuan or above per packet of 200.

A new cigarette wholesale tax levied at 5 percent was also introduced effective May 1.

China is the world’s largest market for tobacco products, with around 2 trillion cigarettes sold each year, and the tax rise will bring in around 30 billion yuan in additional revenue for the central government, Reuters reported, citing an unidentified official.

Fiscal revenue fell for the first four months in 2009. Total revenue for the period decreased 9.9 percent year-on-year to just over 2 trillion yuan, or 31 percent of this year's fiscal budget, Caijing reported earlier.

May fiscal income was up 4.8 percent year-on-year to 657 billion yuan on rising revenue from sales and consumption taxes, the Ministry of Finance said on June 15.

The government forecasts it will run a deficit of 950 billion yuan in 2009, or 3 percent of GDP.

China has more than 350 million smokers, and more than 1 million people die each year from smoking-related illnesses, the official China Daily newspaper reported.
1 yuan = 14 U.S cents

Full article in Chinese: http://www.caijing.com.cn/2009-06-20/110187154.html