Subscribe to our weekly International update on Health Policies

World No Tobacco Day 2014: Raise taxes on tobacco, a proven weapon of mass destruction!

By Swati Srivastava
on June 5, 2014

May 31st of every year is celebrated as World No Tobacco Day (WNTD) by the World Health Organization (WHO) and affiliated partners. The aim of the WNTD is to highlight the adverse risks associated with tobacco consumption, and to mobilize individuals, civil society and policy makers alike on key themes in tobacco control. Now that George Bush is no longer at the helm of affairs, the WHO might want to capitalize on a more lucrative acronym- WMD, for tobacco actually is a proven weapon of mass destruction.

Various themes addressed in the past WNTDs include gender and tobacco and marketing to women; “tobacco kills”; bans of tobacco advertising, promotion and sponsorship, among others. The theme for this year’s WNTD is “Raise taxes on tobacco”, to levels that are effective to reduce consumption.  It includes increasing existing tax rates, moving away from import duties, adopting a simpler tax system, reducing tax differentials amongst tobacco products, and reducing illicit trade.

Price increase, by means of increased taxation or otherwise, is considered to be the single most effective method to decrease consumption and encourage tobacco users to quit. The implementation of tax and price policies to reduce tobacco consumption is recommended by the Framework Convention on Tobacco Control (FCTC), WHO (Article 6, 2005). Consistent evidence demonstrates the effects of higher prices on tobacco products on decreased consumption and initiation of use, above all among adolescents and persons belonging to lower socio-economic strata.  In high income countries, estimates of the price elasticity of cigarette demand range from −0.25 to −0.50, while those from low- and middle-income countries range from −0.50 to −1.00, suggesting that a 10% increase in cigarette prices will lead to reductions in cigarette consumption of 2.5-5% in high income countries and 5-10% in low income countries. Low income countries are important to focus on for other reasons: a larger, younger demographic; lax laws and policies; and being the focus of multinational tobacco companies looking to expand their markets.

While there are almost 6 million deaths attributed to tobacco use every year across the world (with 600,000 of these occurring in non-smokers due to second hand smoke), only 8% of the world’s population lives in countries with tobacco taxes at recommended levels. More than 80% of total tobacco deaths are among people living in low-and middle-income countries. According to WHO figures, in 2012 only 32 countries in the world had complete policies in line with guidelines recommended in the FCTC. Tellingly, 104 countries had minimal or no tobacco taxation policies in place. When we break up countries by income status, the picture is even gloomier, with only 11 middle-income and 1 low income countries meeting the recommended benchmark of the total tax on cigarettes constituting 75% of the total retail price. Again, 96 middle income and 30 low income countries have cigarette taxes less than 50% of the total retail price.

Raising tobacco taxes has to go hand in hand with improving measures to increase tax compliance and governance, especially for indigenous tobacco products such as chewed forms of tobacco, bidiskreteks, etc which have been traditionally subsidized, excluded from taxes or taxed very low in comparison to cigarettes. Also, tax increases must be both indexed to inflation and account for the rise in incomes in growing economics, if they are to be effective, as was seen in the case of Brazil between the years 2007-11.

The tobacco industry, their front groups and governments which are stakeholders in the tobacco supply chain have become more vocal in the run-up to this year’s WNTD. In Bahrain, a move by the government to triple cigarette taxation has been criticized by industry as a violation of the Free Trade Agreement (FTA) that Bahrain has signed with the US. Ten days ago, tobacco company representatives reportedly met a visiting US Trade Department official to discuss the planned increase in taxesAnother study from Australia released a week ago suggests smuggling of tobacco will increase due to the regular increases in tax proposed by the government. Other reasons for concern include the global push to reduce trade restrictions, including those on tobacco. The Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership give tobacco companies “a new place to take disputes — a tribunal that stands separate from and above domestic legal systems.” Tobacco companies took governments in Uruguay and Australia to court; and on the other side of the fence, Indonesia, Ukraine, the Dominican Republic, Honduras, and Cuba have challenged what they have perceived to be discriminatory practices for their tobacco products in the World Trade Organization.

Increase government revenue from tobacco taxation provides an innovative financing mechanism for health, especially if the revenues are earmarked for specific health goals. In India, the total central excise (excluding state revenues) accrued from all tobacco products in 2010-11 amounted to nearly 80% of the total actual expenditure on health and family welfare by the central government, and total tobacco revenues can be used to fund health programs. At present, India levies certain taxes to fund the National Rural Health Mission, but the rates of these are very low. Costa Rica has been a world leader in implementing a phased tax increase with revenue earmarked for tobacco control and other health initiatives. However, the basis of increased taxation must be for the goal of deterring consumption, regardless of revenue generation, which is an additional bonus.

Let’s see whether Mr. Modi thinks likewise in India. But in any case, it doesn’t seem to be mainstream thinking in the global health community – who tend to link sin taxes more and more to financing of Universal Health Coverage in LMICs.

add a comment

Your email address will not be published. Required fields are marked *