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Taxes

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Call To Action

Tobacco tax increases must, over time, make tobacco products less affordable.

Average annual percent change in real excise tax on the most popular price category of cigarettes; 2008–2012

Tobacco excise tax increases that result in higher tobacco product prices are among the most effective tobacco control measures available. The bulk of the peer-reviewed evidence from countries in all stages of economic development confirms that when tobacco product prices increase, people use less of these dangerous products, or quit using them, or never start.

Tobacco companies often claim tax increases are particularly harmful to the poor, but this claim does not hold up to deeper scrutiny. In fact, because they are more sensitive to changes in price than are wealthier people, poorer people get the most health benefits from tobacco tax increases by using less or quitting. However, people who continue to use tobacco may suffer financial hardship (see Tobacco & Poverty) resulting from continued purchases of tobacco. The positive impact of tax increases on public health multiplies when newly generated revenues are reinvested in health programs (see Investing in Tobacco Control). This can help alleviate societal health inequities, especially when such programs are directed to help the poorest members of society, as was done by the Philippines with new tobacco taxes implemented in 2013.

Article 6 of the WHO FCTC encourages parties to raise prices of tobacco products by means of excise tax increases. Excise tax levels should be revised often enough to increase the price of tobacco products at a rate above inflation and income growth, making tobacco products less affordable over time.

Tobacco tax increases work best when implemented within a comprehensive tobacco control program. Tax policies should mandate the use of tax stamps, and set up effective tracking and tracing systems for all tobacco products to discourage illicit trade. Government agencies responsible for health should make sure that they participate in the creation of tobacco tax policies alongside finance and revenue agencies.

Taxes and Prevalence

Cigarette prices and smoking by income group in South Africa; 1993–2003

When taxes raise cigarette prices, the poor get more health benefits than the rich

Advocating for Taxes

The importance of health advocacy in the creation of tobacco tax laws in Mexico

Between 2009 and 2010, public health advocates’ efforts:

  • Equipped a political champion, Senator Ernesto Saro Boardman, with all the evidence and support necessary to counter tobacco industry arguments in the media and opponents in the legislature
  • Released economic reports to counter false industry arguments, inform the public, and maintain positive media coverage
  • Conducted opinion polling to measure public support
  • Partnered with leaders of congressional health commissions on political forums on tax
  • Launched an intensive mass media campaign

Affordability

Change in minutes of labor to purchase a pack of cigarettes; 2009–2012

The relationship between price and income is very important. When prices increase faster than salaries, people must earn more money to afford their cigarettes, which decreases cigarette consumption and increases the rate of quitting.

Resources

Methods

Figures on cigarette affordability from 47 countries from 1997 to 2012 is available in the Source Data file.

Sources

Economist Intelligence Unit. Worldwide Cost of Living Survey. The Economist; 2013.

Union Bank of Switzerland. Prices and earnings: a comparison of purchasing power around the globe. UBS; 2012 [cited 2014 Apr 23].

Blecher EH. The Economics of Tobacco Control in Low- And Middle-Income Countries. School of Economics, University of Cape Town; 2011.

In 2012, Costa Rica earmarked the funds raised from a tobacco tax increase to be DEDICATED TO TOBACCO CONTROL efforts, including surveillance and research capacity building.

“Proposals to earmark excise taxes for health programs are by far THE MOST SERIOUS THREAT due to the many health allegations against cigarettes made by anti-smoking groups.” – The Tobacco Institute (an industry trade group in the USA), 1989.

“Sugar, rum, and tobacco, are commodities which are nowhere necessaries of life, [but] which are … objects of almost universal consumption,and which are therefore EXTREMELY PROPER SUBJECTS OF TAXATION.”–Adam Smith, 1778, United Kingdom

Many health insurance plans in the USA levy tobacco user surcharges on premiums as an economic disincentive to smoke. For a ‘pack-a-day’ smoker, an $80 monthly tobacco surcharge INCREASES THE COST OF SMOKING BY $2.25 PER DAY. In an early study, over 40% of tobacco users reported quitting tobacco to avoid the surcharge.

–Liber et al, Nicotine and Tobacco Research, 2014.

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Prices

Continuing to increase the price of tobacco products is a cornerstone of tobacco control.

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