Abstract
BackgroundSeveral studies have shown the beneficial effects of tobacco fiscal policy, but distributional effects have been less examined, especially at the subnational level. The objective of this study is to analyse the distributional effects of a one-peso tobacco tax increase (roughly equivalent to tripling the current excise tax) on health, poverty, and financial outcomes at the subnational level in Mexico.MethodsWe employ an extended cost-effectiveness analysis that estimates life-years gained, smoking attributable deaths averted, treatment costs averted, number of persons avoiding poverty and catastrophic health expenditures, and additional tax revenues by income group across five regions.ResultsWith the one-peso tax increase (or 44% price increase), about 1.5 million smokers would quit smoking across the five regions, resulting in nearly 630 thousand premature deaths averted and 12.6 million life years gained. The bottom income quintile would gain three times more life years gains than the top quintile (ratio 3:1), and the largest gain for the most deprived would occur in the South (ratio 19:1), the region with the highest poverty incidence. Costs averted and additional tax revenues would reach 44.6 and 16.2 billion pesos, respectively. Moreover, 251 thousand individuals would avoid falling into poverty, including 53.2 in the lowest income quintile, and 563.9 thousand would avoid catastrophic health expenditures. Overall, the bottom income group would obtain 26% of the life years gained and 24% of the cost averted, while only paying 3% of the additional tax revenue.ConclusionsThe most significant gains from a substantial cigarette price increase would be for the poorest 20%, especially in the South, the most impoverished region of Mexico. Therefore, tobacco taxes are an opportunity for governments to advance in equity and towards the achievement of sustainable development goals on non-communicable diseases.
Highlights
Several studies have shown the beneficial effects of tobacco fiscal policy, but distributional effects have been less examined, especially at the subnational level
Mexico was the first country in the Americas to ratify the WHO-FCTC in 2004, and has implemented several tobacco control measures at the national and subnational level, such as graphic warnings, restrictions on tobacco advertising, complete ban on tobacco-product sponsorships and promotional items, and smoke-free indoor environments with special smoking areas —except for 15 states that fully protect non-smokers [7]
The aim of this study is to extend previous analyses to estimate the distributional effects of tobacco fiscal policy at the subnational level in Mexico
Summary
Several studies have shown the beneficial effects of tobacco fiscal policy, but distributional effects have been less examined, especially at the subnational level. The structure of the tobacco excise tax (called Special Tax on Production and Services or IEPS by its acronym in Spanish) has been significantly strengthened with the homologation of rates for all tobacco products in 2007 (except for those entirely handmade) and the incorporation of a specific component of 4 cents per cigarette in 2010 which was substantially increased to 35 cents in 2011 [8]. The results of this large increase demonstrated the beneficial impact of taxation on tobacco consumption and revenues [9]. The overall prevalence of smoking decreased 11.2% or 2.4 percentage points between 2002 and 2016 (from 21.4 to 19.0%) —mainly due to reductions among daily smokers (from 13.5 to 7.0%)— [10], a substantial tax increase is needed to further reduce smoking prevalence to less than 12.5% by 2025 (the 30% reduction target relative to 2010) [11], demonstrating that taxes are a central public health measure to cut down the epidemic of noncommunicable diseases and advance towards the achievement of goal three of the 2030 Agenda for Sustainable Development [12, 13]
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