China to Start Taxing E-cigarettes Nov. 1

The Chinese government will start taxing e-cigarettes on Nov 1., reports Reuters.

Producers and importers of e-cigarettes will incur a 36 percent levy while wholesale distributors must pay an 11 percent tax.

Experts said that the annual sales revenue of domestic e-cigarette makers is about RMB20 billion ($27.36 billion), so the tax may contribute an additional RMB10 billion to the government’s annual revenue, according to The Global Times.

China has long been the world’s largest producer of e-cigarettes, though consumption lags behind that of Western countries.

Inspired by the overseas success of the Juul, venture-backed startups started marketing e-cigarettes to domestic consumers in 2018.

These companies operated in a legal gray area until the State Tobacco Monopoly Administration (STMA) asserted its authority over the business. In 2021, the STMA announced that it would require e-cigarette companies to obtain a license in order to continue selling to consumers.

Tobacco products remain a major revenue generator for Beijing, with cigarette sales generating roughly 5 percent of the central government’s tax revenue each year.

The STMA operates under China’s Ministry of Industry and Information Technology. China Tobacco, STMA’s commercial arm, is a shareholder in China’s state-backed investment fund for the chip industry.