(Xiaochen 4x/photo)
On October 25, 2022, the Ministry of Finance, General Administration of Customs , and the State Administration of Taxation jointly issued the "Announcement on the Issuance of Consumption Tax on Electronic Cigarettes" (hereinafter referred to as the "Announcement"), which included electronic cigarettes in the scope of consumption tax collection. The
announcement stipulates that the tax rate for the production (import) stage of e-cigarette production (import) stage is 36%, and the tax rate for the wholesale stage is 11%, which will be implemented from November 1, 2022.
Enterprises that produce and wholesale electronic cigarettes shall be taxed based on the sales of electronic cigarettes produced and wholesale. If an electronic cigarette manufacturer sells electronic cigarettes by agency sales, the tax will be calculated based on the sales amount sold by the dealer to the wholesale enterprise. In addition, if an electronic cigarette manufacturer is engaged in OEM processing business, it should separately calculate the sales of the trademark and OEM processing electronic cigarettes.
"In short, taxes are collected based on finished products. The tax rates for cigarette cartridges and cigarette equipment are 36% + 11%. "Ao Weinuo, Secretary-General of the Electronic Cigarette Professional Committee of the China Electronic Chamber of Commerce, explained to Southern Weekend reporters. The E-cigarette Special Committee has participated in the formulation of the above announcement.
consumption tax is a new tax opened in 1994, and all taxes belong to the central government. The main tax source is tobacco, alcohol, gasoline and automobiles, and other products account for a small proportion. At present, cigarettes are mainly taxed in the production and wholesale process, and are collected from the quantity.
Previously, e-cigarettes were taxed on ordinary consumer goods, with a tax rate of around 13%. After the change of consumption tax, the overall tax rate of e-cigarettes has increased by about 34%, which is closer to the traditional cigarette tax rate.
In May 2015, National Tobacco Monopoly Administration raised the cigarette consumption tax, and the wholesale tax rate increased from 5% to 11%. The State Tobacco Monopoly Administration published an article on its official website saying that the comprehensive tax burden of cigarettes is expected to be 62.6% that year. In other words, the tax rate in the wholesale process of e-cigarettes is consistent with that in traditional cigarettes.
A person from a tobacco monopoly bureau in a prefecture-level city in Jiangxi told the reporter of Southern Weekend that now only tobacco companies in various places have the right to wholesale e-cigarettes, and taxes are related to the amount of goods obtained by tobacco companies from e-cigarette brands. "After the tobacco company receives the goods, the terminal retailer then places an order at the e-cigarette transaction management platform."
In the past few years, the policy of the e-cigarette industry has been adjusted many times. The collection of consumption tax this time means that the relevant policies have gradually become clear and can play a role in stabilizing the market.
squeezes the profit margin of the industry
The financial report of the parent company of Rex, the parent company of the leading electronic cigarette company, Wuxin Technology (NYSE:RLX), showed that its revenue in the second quarter of 2022 was 2.234 billion yuan, a year-on-year decrease of 12%, and its gross profit margin was 43.8%. After the 36% tax rate is imposed in the production process, the profit margin will be further compressed. A reporter from Southern Weekend called Reek, but no response was received as of press time. The cumulative impact of
on tax calculations in the production and wholesale links will be transmitted to e-cigarette terminal retailers and consumers in early November.
"I had expectations before, so it is not surprising to issue policies today, but it has always compressed the profit margin of the store, and the pressure is relatively high." Yudong has been in the electronic cigarette industry for many years and now has operated more than a dozen electronic cigarette retail stores in Foshan, Guangdong. He told the Southern Weekend reporter that when picking up goods from the platform, there will be pickup prices and suggested retail prices, "These two prices should be adjusted next month."
In Yudong's view, the tax rate is high, and retailers can hedge by raising terminal retail prices, but there are also many alternatives that consumers can choose, which may lead to a decline in sales. In addition, the purchase cost of stores will increase.
In the past two years, the e-cigarette industry has been managing in reference to the traditional cigarette industry, and the change of consumption tax is only one of them.
has the biggest impact on the industry this year. It is to completely abolish fruity e-cigarettes in the mainland Chinese market, replace them with a single tobacco flavor, and set up a new national standard. The policy began to be implemented in early October. "After the implementation of the new policy, the revenue was only 30% of the original." Yudong introduced.
The person from the tobacco monopoly bureau of a prefecture-level city in Jiangxi also said that more than 70% of local e-cigarette offline stores have been closed.
is consistent with the cancellation of fruity e-cigarettes, and the consumption tax is only targeted in the mainland Chinese market. The above announcement clearly states that the tax refund (exemption) policy shall be applied to the export of e-cigarettes. Ao Weinuo said that the consumption tax is only for products sold in mainland China, and there is no need to pay consumption tax for exports, and he will continue to enjoy the tax refund policy.
The "2021 Electronic Cigarette Industry Blue Book" released by the China Electronics Chamber of Commerce's E-cigarette Industry Committee shows that overseas is the main market for e-cigarette consumption. China's e-cigarette retail sales in 2021 are estimated to be 19.7 billion yuan, and the scale of China's e-cigarette industry exported overseas is about 138.3 billion yuan, seven times the former.
(At the request of the interviewee, Yudong is a pseudonym.)
Southern Weekend reporter Wu Chao
