The health, financial and distributional consequences of increases in the tobacco excise tax among smokers in Lebanon

Nisreen Salti,Elizabeth Brouwer,Stéphane Verguet

doi:10.1016/j.socscimed.2016.10.020

Abstract

Tobacco use is a significant risk factor for the leading causes of death worldwide, including cancer, heart disease and stroke. Most of these deaths occur in low- and middle-income countries, where tobacco-related deaths are also rising rapidly. Taxation is one of the most effective tobacco control measures, yet evidence on the distributional impact of tobacco taxation in low- and middle-income countries remains scant. This paper considers the financial and health effects, by socio-economic class, of increasing tobacco taxes in Lebanon, a middle-income country.An Almost Ideal Demand System is used to estimate price elasticities of demand for tobacco products. Extended cost-effectiveness analysis (ECEA) methods are applied to quantify, across quintiles of socio-economic status, the health benefits gained, the additional tax revenues raised, and the net financial consequences for households from a 50% increase in the price of tobacco through excise taxes. We find that demand for tobacco is price inelastic with elasticities ranging from −0.32 for the poorest quintile to −0.22 for the richest quintile. The increase in tobacco tax is estimated to result in 65,000 (95% CI: 37,000–93,000) premature deaths averted, 25% of them in the poorest quintile, $300M ($256–340M) of additional tax revenues, 12% borne by the poorest quintile, $23M ($13–33M) of out-of-pocket spending on healthcare averted, 36% of which accrue to the poorest quintile, 9% to the richest. These savings would be associated with 23,000 (13,000–33,000) poverty cases averted (63% in the poorest quintile). Increasing tobacco taxes would lead to large financial and health benefits, and would be pro-poor in health gains, savings on healthcare, and poverty reduction.

Highlights

Non-communicable diseases (NCDs) are the leading cause of death worldwide, and the vast majority of NCD deaths occur in low- and middle-income countries (Alwan et al, 2010; Murray et al, 2015)
We draw closely on the approach used by Verguet et al (2015a) and conduct an effectiveness analysis (ECEA) to examine the household health and financial benefits, and overall distributional consequences of increasing the tobacco excise tax in Lebanon
The point estimates of elasticities are monotonically increasing as we move from richer to poorer socio-economic groups, ranging from À0.32 for the poorest quintile to À0.22 (À0.31:À0.14) for the richest. This inverse relationship between the sensitivity of demand and socio-economic status is in line with the findings in the literature

Summary

Introduction

Non-communicable diseases (NCDs) are the leading cause of death worldwide, and the vast majority of NCD deaths occur in low- and middle-income countries (Alwan et al, 2010; Murray et al, 2015). The World Health Organization (WHO) puts an estimate of the annual economic burden of tobaccorelated illnesses at over $500 billion, which exceeds total annual health expenditures in low- and middle-income countries (WHO, 2014b). The number of tobaccorelated deaths in low- and middle-income countries is projected to reach 7 million deaths per year by 2030, doubling the level of 2010 (NCD Alliance, 2011). We estimate that total spending on tobacco products in the Lebanese market is even larger at $850 million (CAS, 2005; National Customs Authority, 2012), just under 2% of GDP

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Results

Conclusion