tobacco tax

Topics: World Health Organization, Tobacco, Cigarette Pages: 7 (1129 words) Published: December 26, 2013
Tobacco tax:
good for
health,
good for
government
finances
Tobacco use kills over 5 million people each year and is
the largest single preventable cause of premature death.1
Tobacco is very costly to society through high costs to treat tobacco-induced disease or through loss of productivity as a result of the premature deaths. But governments have a tool
to combat the costs of tobacco use — tobacco taxation.

Higher tobacco prices decrease consumption
and encourage people to quit
Increasing the price of tobacco products is the single most
effective way to reduce consumption.2 Raising prices discourages uptake of tobacco use by young people and motivates people to quit tobacco use, while raising government revenues.3 Numerous studies in high income countries have shown that

a 10% increase in cigarette price decreases consumption by
about 4%.4
Available data indicate that consumption in low and middle
income countries is even more responsive to price. For
example, the estimated decreases would be about 5.5% in
China, 5.2% in Mexico and 5.4% in South Africa.5,6,7
For tobacco products other than manufactured cigarettes,
studies are comparatively rare, although similar effects have been found.8

Price (SA rand)

Packs
100

25

Real Cigarette prices (2008 base)
Packs sold per capita

20
80

15
60
10

40
5

20

1980

1985

1990

1995

2000

2005

2009

0

Year

Inflation-adjusted cigarette prices and cigarette consumption, South Africa, 1980-2009

Higher tobacco prices save lives
Decreasing consumption would translate into lives saved. The World Bank has estimated that tax increases to raise the price of cigarettes by 10% would:
ƒƒ Cut the number of smokers in the world by 42 million — 38 million of them in low to middle income countries;
ƒƒ Save 10 million lives — 9 million of them in low to middle income countries.9

PHOTO: WBB Trust

WWW.NCDALLIANCE.ORG

How many lives could tobacco tax increases save?
Recent economic analyses for countries with large numbers of smokers found that:

in China:

in Indonesia:

in Russia:

Increasing tax from 40% to 68%
of the retail price would:

Increasing tax from 37% to 70%
of the retail price would:

Increasing tax from 33% to 70%
of the retail price would:

ƒƒGenerate US$16.4 billion a year in
additional tax revenue

ƒƒGenerate US$6.5 billion a year in
additional tax revenue

ƒƒGenerate US$4.9 billion a year in
additional tax revenue

ƒƒHelp 54.6 million smokers to quit

ƒƒHelp 10 million smokers to quit

ƒƒHelp 5.4 million smokers to quit

ƒƒSave 13.7 million lives12

ƒƒSave 3.5 million lives

ƒƒSave 1.3 million lives14

Tobacco and poverty
Those living on lower incomes are more likely to smoke,
and policy makers are sometimes concerned that increasing
tobacco tax will penalise people who are already living in
reduced circumstances. But it is important to note that poorer smokers are also the most price sensitive — in other words, they are the most likely to quit or reduce their consumption of tobacco when taxes are increased. This has been confirmed

in multiple studies. For example, when tobacco excise was
increased in South Africa over several years in the mid to late 1990s, the largest reductions in smoking prevalence were seen among young people and low-income earners.11
10

When smokers quit, their families benefit in two ways: through improved health and through improved finances — money
previously spent on tobacco products can be spent on food,
education and other necessities. If policy makers are concerned about the economic impact of tobacco tax increases on low-income smokers who do not reduce their consumption,
they can invest part of the added tobacco tax revenue in social spending.

13

In addition to savings to the public sector, business can also benefit from a healthier workforce, with lower absenteeism and fewer losses of skilled workers through...
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