Government doubles health tax on tobacco products

By Jackie Lin and Ko Shu-ling  /  STAFF REPORTERS , WITH AP

Wed, Jan 04, 2006 - Page 1

The government is to double the "special health tax" on tobacco products in a move to reduce the number of smokers and smoking-related diseases.

According to amendments to the Tobacco and Liquor Tax Law (菸酒稅法) passed yesterday by the legislature, a NT$500 (US$15) "special health fee" will be levied per each 1,000 cigarettes. The original fee was NT$250.

The fee for loose tobacco, cigars and other cigarette products will be increased from NT$250 to NT$500 per kilogram.

Ninety percent of the proceeds will be funneled into the national health insurance program as a safety fund, while the remaining 10 percent will go to central and local governments to pay for measures related to health problems, a crackdown on bootleg cigarette products, combating tax evasion on tobacco products and social welfare.

Statistics show that there are 4.5 million smokers in Taiwan, with more than 200,000 of the nation's 23 million people picking up the habit every year.

Smokers are six times more likely to develop throat cancer than their non-smoking counterparts, 5.8 times more likely to develop cervical cancer and are three times more likely to develop lung cancer.

The nation spends an average of NT$18 billion annually on smoking-related illnesses.

The move to raise money for the national health-insurance program will undoubtedly affect sales, manufacturers said.

The tax hike is expected to generate NT$6 billion in additional tax revenue for the national health-insurance program.

Chan Shih-chu (詹賜局), director of the tobacco department at state-run Taiwan Tobacco and Liquor Corp (TTL), said with the new rule implemented, the health tax levied on a pack of cigarettes would rise to at least NT$10, from the current NT$5.

"We believe the imposition of the double tax will be completely reflected in the retail price and decrease tobacco sales," he said in a phone interview.

Although it is hard to evaluate the new rule's impact, Chan, citing a US study, said sales could slide by 3 percent to 5 percent for every 10 percent increase in price.

TTL, which has a 40 percent share of the local tobacco market, sold 1.7 million boxes of cigarettes last year, raking in over NT$26 billion in revenues.

But the company has seen gross profits decline in recent years with several anti-tobacco rules in place.

The Tobacco Hazards Act (菸害防治法), for example, prohibits any promotional activities for tobacco products, and Chan was noncommittal when asked whether the firm would come up with any methods to offset the new regulation's impact.