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An increase in the specific excise tax of RMB 1 on a pack of cigarettes would increase government revenue by RMB 64.9 billion (US$ 7.9 billion), save 3.4 million lives, reduce medical costs by RMB 2.68 billion (US$ 325 million) and generate a productivity gain of RMB 9.92 billion (US$ 1.2 billion) for the Chinese economy.

Over the past decade a clear dichotomy has developed between developed and developingcountries. Cigarettes are becoming less affordable in developed countries and much more affordable in developing countries.

Implementing the maximum legally allowable tobacco tax rates could prevent between 1.7 and 4.0 million tobacco-related deaths among smokers and generate additional revenues of US$ 3.2 to 6.5 billion. Doubling the tobacco tax could increase employment by more than one quarter of a million jobs.

Bidis are under-taxed compared to cigarettes, taking into account the health risks of each, and therefore, on health grounds, a strong case can be made for increasing the excise burden on bidis.

Governments can raise significant revenue through cigarette taxes without placing a large net burden on the poor. Indeed, for most parameter values our calculations suggest that tobacco taxes are progressive.