Taxman targeting e-cigs

China will impose a consumption tax on e-cigarettes sold domestically beginning Nov 1 to better play its role in guiding healthy consumption, according to a joint statement by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration.

According to the statement on Tuesday, a tax rate of 36 percent will be placed on the production or importation of e-cigarettes, while an 11 percent tax will be placed on the wholesale distribution of e-cigarettes.

"The move will help guide the country's healthy consumption and maintain the health of Chinese consumers, as e-cigarettes contain harmful substances," said Li Xuhong, a professor at the Beijing National Accounting Institute.

Currently in China, tobacco products like cigarettes, cut tobacco and cigars have been included in consumption tax levies. But e-cigarettes are currently only given a 13 percent value-added tax as a common consumer product.

"Also, imposing a consumption tax on e-cigarettes is meant to maintain fairness. If e-cigarettes are not included, they may stimulate smokers to switch to such products," Li said.

The Qianzhan Industrial Research Institute said sales revenue of e-cigarettes in China reached 19.7 billion yuan ($2.7 billion) last year, up 36 percent year-on-year.

A report from Minsheng Securities also noted that it is a global trend to levy consumption taxes on new tobacco products.