China News Service, October 28 (Xie Yiguan, a reporter from China-Singapore Finance and Economics) Recently, the Ministry of Finance, the General Administration of Customs, and the State Administration of Taxation issued the "Announcement on the Collection of Consumption Tax on Electronic Cigarettes" (hereinafter referred to as the "Announcement"), which included electronic cigarettes in consumption tax. The scope of levy is to add a sub-item for electronic cigarettes under the tobacco tax item.
This means that the e-cigarette consumption tax will be officially implemented in my country.
Data map.
Photo by China News Service reporter Jin Shuo
Electronic cigarette regulation is aligning with traditional cigarettes
Regarding the consumption tax levied on e-cigarettes, Zhang Jianshu, president of the Beijing Tobacco Control Association, told a reporter from China-Singapore Finance and Economics, "This is the general trend, and it is a means for relevant departments to strengthen tobacco control and supervision."
In recent years, the domestic e-cigarette industry has developed rapidly, but at the same time, the industry also has uneven product quality, such as the addition of unsafe ingredients, leakage of e-liquid, and inferior batteries in a large number of products.
A number of studies at home and abroad have also shown that e-cigarettes are harmful to health.
In November 2021, the State Council issued the "Decision on Amending the Regulations on the Implementation of the Tobacco Monopoly Law of the People's Republic of China", adding Article 65 "Electronic cigarettes and other new tobacco products shall be implemented with reference to the relevant regulations on cigarettes in these Regulations", Tobacco is officially included in the regulation of the tobacco system.
In March and April of this year, the "Administrative Measures for Electronic Cigarettes" and the national standards for "Electronic Cigarettes" were successively released. The sales of flavored electronic cigarettes other than tobacco flavors and electronic cigarettes that can add atomizers by themselves are prohibited.
In addition, the "Implementation Rules for the Identification and Testing of Electronic Cigarette Products", "Regulations on Electronic Cigarette Warning Signs", "Details of Electronic Cigarette Logistics Management", "Details of Electronic Cigarette Transaction Management (Trial)" and other documents have been issued successively, which further regulates the development of the electronic cigarette industry.
"With the promulgation of the consumption tax levy announcement, domestic e-cigarette supervision has been implemented in stages. Domestic e-cigarettes are on par with traditional cigarettes in terms of production specifications, circulation sales, and taxation, and industry risks have been significantly released." Cinda Securities analyst Li Hongpeng said.
After the "Announcement" was released, a reporter from Zhongxin Finance noticed that the e-cigarette sector continued to strengthen. As of October 27, Shunhao shares had risen by the limit for two consecutive days, and other related stocks also rose.
In addition, Hong Kong stocks Smol International rose sharply for two consecutive days, and U.S. stocks Fogcore Technology rose more than 40% on the 26th local time.
An electronic cigarette collection store in Fengtai District, Beijing.
Photo by China News Service reporter Xie Yiguan
E-cigarette prices may rise
The "Announcement" mentioned that e-cigarettes are subject to an ad valorem rate approach to calculate tax payments.
The tax rate for the production (import) link is 36%, and the tax rate for the wholesale link is 11%.
"At present, in the tax collection and management of my country's cigarettes in the production process, the consumption tax rates of Class A and Class B cigarettes are 56% and 36% respectively. The taxation standard of electronic cigarettes is the same as that of Class B cigarettes, which is relatively loose, which is also in line with the lower taxation of electronic cigarettes in the international market than traditional cigarettes. The practice of cigarettes." Guohai Securities analyst Lu Guanyu said.
Previously, e-cigarettes were only levied 13% value-added tax as ordinary consumer goods. After the implementation of the new tax rate, the comprehensive cost of e-cigarettes may usher in an increase.
Will the price of e-cigarettes rise because of this?
A staff member of a RELX store in Beijing told a reporter from Zhongxin Finance and Economics, "At present, the price of electronic cigarettes in the store has not been raised, but after the implementation of the consumption tax, I don't know if the price will rise, and everything has to wait for notification."
"The price may rise, but it may also be digested by the enterprise itself." Zhang Jianshu believes, "Although the tax has increased, the enterprise may also retain the existing price to maintain competitiveness."
Ma Yuanfang, an analyst at Huaan Securities, believes that in the price system, the leading brands have a certain customer base and brand precipitation, or adopt a strategy of not increasing prices to obtain more orders from shop owners and seize market share.
However, due to the lack of strong customers and brand power in the middle and lower reaches of the scale, the profit is insufficient or cannot support the long-term development of the enterprise, and the prices of their products may increase to a certain extent.
Data map.
Photo by China News Service reporter Jin Shuo
Will the industry landscape change?
Previously, the "2021 Electronic Cigarette Industry Blue Book" jointly released by the Electronic Cigarette Industry Committee of the China Electronic Chamber of Commerce and others showed that the market size of China's electronic cigarette industry in 2021 will reach 19.7 billion yuan, a year-on-year increase of 36%.
Li Hongpeng believes that in the long run, the growth trend of traditional tobacco will slow down. As a harm reduction substitute for traditional cigarettes, e-cigarettes will develop in an orderly manner after being regulated in my country, and there is still room for product penetration.
The "2021 Electronic Cigarette Industry Blue Book" also shows that by the end of 2021, there are more than 1,500 electronic cigarette manufacturing and brand-related enterprises in my country, including more than 1,200 manufacturers, more than 200 electronic cigarette brand enterprises and about 120 cigarette manufacturers. oil companies.
Affected by a series of regulatory measures before, the e-cigarette industry has undergone a round of "reshuffle". After the implementation of the consumption tax, will the industry pattern change?
"Generally speaking, after the industry implements strict supervision, it is more conducive to the development of large enterprises, because the market is more standardized and the standards are more clear, but some small enterprises may face elimination." Zhang Jianshu said.
Caitong Securities analyst Liu Yang also mentioned that after the consumption tax is imposed on e-cigarettes, the advantageous enterprises in the industrial chain have a larger scale advantage, and the cost reduction effect of automated production is obvious, which can smooth the tax impact. will be further improved.
It is worth mentioning that the "Announcement" proposes that the export tax refund (exemption) policy applies to taxpayers exporting electronic cigarettes.
According to the "Blue Book of Electronic Cigarette Industry Export in 2022", more than 70% of the current more than 1,500 electronic cigarette manufacturing and brand enterprises mainly export their products overseas.
It is estimated that the total export value of e-cigarettes in China will reach 186.7 billion yuan in 2022, with a growth rate of 35%.
"In the future, the export of electronic cigarettes will continue to enjoy the 13% tax rebate policy, which proves that the export of electronic cigarettes will continue to be encouraged by the policy. However, my country's electronic cigarette exports account for a large proportion, and the export tax rebate policy is conducive to the sustainable development of the industry." Huaxi Securities believes.
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