Chinese tobacco companies have been banned from claiming tax breaks on advertising, promotional and sponsorship spending, reports the national news agency Xinhua.

In a joint circular issued Monday, but backdated to 1 January last year, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) declared an end to tax breaks on promotional spending for tobacco firms. The circular is effective until 31 December 2010, after which all forms of tobacco promotion will be banned in China.
Before the law on enterprise income tax went into effect in January 2008, Chinese firms could claim back 2 to 8 per cent their taxable income. Under the new law, the rate was standardised at 15 per cent for all industries, except the tobacco industry. Tobacco companies would thus pay more tax and their after-tax profits would drop, indicating the government was taking a tougher stance to curb smoking. (pi)