On 28 August 2017, the Law of the People’s Republic of China on Tobacco Leaf Tax (Draft) was submitted to the 29th Session of the 12th Standing Committee of the NPC with the current tax rate of 20% to remain unchanged.

According to the Third Plenum of the 18th CPC Central Committee, the principle of law-based administration shall be implemented. The tobacco leaf tax law is the first legislative program that has been escalated from interim regulations to tax law in accordance with that principle.

Xiao Jie, Minister of Finance, said in his explanation for the draft law of tobacco leaf tax that the State Council listed the tobacco leaf tax law as the legislative program strongly demanded in deepening the reform in all respects this year. The tobacco leaf tax system stays stable with reasonable elements. In practice, the existing tax system framework and tax burdens may remain little changed, ensuring smooth escalation of interim regulations into law.

As for the formation of the draft of the tobacco leaf tax law, the Ministry of Finance and the State Administration of Taxation (SAT) drafted and submitted to the State Council the Law of the People’s Republic of China on Tobacco Leaf Tax (Draft for Review), based on in-depth surveys and solicitation of public ideas; the Legislative Affairs Office of the State Council solicited ideas from relevant central departments, provincial people’s governments, relevant enterprises and NGOs and studied, revised and finalized the Draft together with the Ministry of Finance and the SAT, said Xiao Jie.

The Draft clarifies that taxpayers of tobacco leaf tax are the units purchasing tobacco leaves in China, especially the tobacco companies with the right to purchase tobacco leaves or the units they entrust to purchase tobacco leaves; the basis of tobacco leaf tax is the total payments taxpayers make for the purchase of tobacco leaves; to ensure the smooth implementation of the tobacco leaf tax law, the tax rate of 20% will remain unchanged.