Tobacco Tax Revenues Research Articles

Better cigarette tax policies and higher tobacco excise tax revenues

BackgroundIn November 2021, the Tobacconomics team published the second edition of the Cigarette Tax Scorecard which evaluates cigarette taxation in each country based on four components—cigarette price, affordability change, tax...

Unlocking the power of tobacco taxation to mitigate the social costs of smoking in Mexico: a microsimulation model.

Despite being the most cost-effective tobacco control policy, tobacco taxation is the least implemented component of the World Health Organization MPOWER package to reduce smoking worldwide. In Mexico, both smoking prevalence and taxation have remained stable for more than a decade. This study aims to provide evidence about the potential effects of taxation to reduce the burden of tobacco-related diseases and the main attributable social costs in Mexico, including informal (unpaid) care costs, which are frequently ignored. We employ a first-order Monte Carlo microsimulation model that follows hypothetical population cohorts considering the risks of an adverse health event and death. First, we estimate tobacco-attributable morbidity and mortality, direct medical costs and indirect costs, such as labour productivity losses and informal care costs. Then, we assess the potential effects of a 50% cigarette price increase through taxation and two alternative scenarios of 25% and 75%. The inputs come from several sources, including national surveys and vital statistics. Each year, 63 000 premature deaths and 427 000 disease events are attributable to tobacco in Mexico, while social costs amount to MX$194.6 billion (US$8.5)-MX$116.2 (US$5.1) direct medical costs and MX$78.5 (US$3.4) indirect costs-representing 0.8% of gross domestic product. Current tobacco tax revenue barely covers 23.3% of these costs. Increasing cigarette prices through taxation by 50% could reduce premature deaths by 49 000 over the next decade, while direct and indirect costs averted would amount to MX$87.9 billion (US$3.8) and MX$67.6 billion (US$2.9), respectively. The benefits would far outweigh any potential loss even in a pessimistic scenario of increased illicit trade. Tobacco use imposes high social costs on the Mexican population, but tobacco taxation is a win-win policy for both gaining population health and reducing tobacco societal costs.

Macroeconomic impact of tobacco taxation in Indonesia

BackgroundA significant tobacco tax increase has long been advocated to reduce Indonesia’s high smoking prevalence. However, implementing such a policy remains challenging due to the tobacco industry’s argument that it...

Effects of the illicit market on the price elasticity of cigarette consumption in Brazil

BackgroundAn important element to consider in tobacco tax policy is the illicit market of cigarette sales. The objective of this paper is to provide estimates of both conditional and unconditional...

Perspectives on reforming the tobacco tax administration system in Bangladesh to enhance public health

BackgroundTaxation is the most cost-effective instrument to regulate the consumption of tobacco products. However, weak tax administration can compromise the effectiveness of taxation. This paper aimed to understand the process...

Taxation formula for tobacco in Sri Lanka

Article 06 of the WHO Framework Convention on Tobacco control emphasizes the importance of implementing effective tax and price policies for Tobacco products. To fight against the Tobacco epidemic WHO has introduced the MPOWER package which R stands for raising taxes on Tobacco. According to WHO standards, 70% of the excise tax from the retail price will contribute to an effective Tobacco tax indexation policy. National Authority on Tobacco and Alcohol organized Tobacco Taxation and Illicit Trade virtual workshop with the collaboration of WHO FCTC Knowledge Hub on Tobacco Taxation, Research Unit on the Economics of Excisable Products, University of Cape Town. The developed Tobacco tax indexation formula of the National Authority on Tobacco and Alcohol was modified by including exogenous factor with the guidance of experts of WHO FCTC Secretariat Knowledge Hub on tobacco taxation. Tobacco tax simulation modeling can be used to predict how much tobacco consumption will decrease, and government revenue will increase if there is a change in the tobacco excise tax structure and an increase in the level of taxation. Preliminary evidence from the TETSiM model predicts that a 91.6 to 124.6 billion increase in tobacco excise taxation from the current 2022 to 2026 would lead to a 1.1 % drop in consumption and approximately 101.8 to 136.9 billion increases in government revenue. The finding of the modeling of Tobacco taxes with the TETSiM model will lead to an increase in Tobacco tax revenue and decrease Tobacco consumption in Sri Lanka.

The introduction of tobacco excise taxation in the Gulf Cooperation Council Countries: a step in the right direction of advancing public health

BackgroundThe Gulf Cooperation Council (GCC) countries relied, until recently, solely on import duties for tobacco products. The agreement for the introduction of an excise and value added tax (VAT) in 2016 and 2017, respectively, in most GCC countries, was a major breakthrough for public health. There is, however, ample room for improvement.MethodsThe study examines the outcomes of tax reforms, for both public health and public finances, based on the World Health Organization (WHO) recommendations and best practices worldwide. Tax simulations were performed using the WHO TaXSiM model. The study is based on data from Saudi Arabia, the only GCC country for which sufficient data existed.ResultsWe recommend a stepwise tax reform, which involves increasing the current ad valorem excise tax rate, phasing out import duties keeping total tax share constant and introducing a minimum excise, and finally switching to a revenue-neutral specific excise. Specific excises must be adjusted for inflation and income increases. If implemented, cigarette tax reform simulations show that the recommended reforms would lead to a higher than 50% increase in cigarette prices, 16% reduction in cigarette sales and almost 50% increase in total cigarette tax revenue. A significant number of cigarette-related deaths would be averted.ConclusionsThe recommended tax reforms are expected to lead to significant improvements in both public health and tobacco tax revenues. Our results provide useful insights that are of relevance to the whole GGC region. The effectiveness of the reforms, however, requires a strong tax and customs administration, including the establishment of a good database to monitor and advance public health.

Tobacco industry in Mexico: a general equilibrium analysis

ObjectiveEffects of tobacco taxation on employment in Mexico are measured by using an applied general equilibrium model.MethodsThe study describes the modelling methodology based on a 2013 social accounting matrix for...

Effects of the Brazilian tax reform plans on the tobacco market

BackgroundThere has been an intense debate in the Brazilian National Congress on how to reform the country’s tax system on consumption. This paper investigates the effects of the tax reform...

The politics of funding universal healthcare: Diverting local tobacco taxes to subsidise the national health scheme in Indonesia

AbstractIn Indonesia, the national universal health coverage scheme (Jaminan Kesehatan Nasional [JKN]) has consistently overspent against its budget since it was introduced in 2014. In 2017, a new regulation diverted 37.5% of tobacco tax revenue collected at the district and city level to the central government in order to increase government contributions to the JKN. Through a review of policy documents and interviews and focus group discussions with relevant stakeholders, this article explores the history of the JKN and its relationship to local tobacco taxes. Offering an ex‐post assessment of the policy and its implementation, we find it negative on three fronts: funding for local anti‐smoking initiatives and services was cut, the procedures for implementing the policy were complex and time‐consuming, and it did not contribute as much as anticipated to the JKN. These findings underscore potential pitfalls of politically motivated policy that fails to consider implementation and impact. We recommend that the policy be revoked, and local tobacco tax revenue reallocated to its initial purpose, which includes promoting local smoking prevention programs and health service delivery.

Price and expenditure elasticity of cigarette demand in El Salvador: a household-level analysis and simulation of a tax increase

BackgroundIn El Salvador, 8.8% of adults 15 years and older smoke cigarettes. Little is known about the sensitivity of cigarette consumption among the adults in El Salvador to tax and...

Progress in Controlling Illicit Tobacco Trade in Singapore

Despite increasing industry-funded reports of illicit tobacco trade in Singapore, Singapore’s revenue from tobacco tax has been increasing in the past decade. This is partly because Singapore has one of the highest tobacco tax rates in ASEAN – second only to Thailand’s 70%, estimated at 60% (before the 7% goods and services tax) of cigarette retail price since it has increased tobacco taxes by 10% in 2018. The tobacco industry has been known to inflate illegal tobacco trade statistics to oppose tobacco tax increases (Gallagher et al., 2019). Moreover, the tobacco industry, through industry-funded think-tanks as front groups, has also utilized arguments based on trade, particularly the impact of taxation on illicit tobacco trade, to oppose tobacco tax increases (SEATCA, 2014; Ross, 2015). Singapore’s progress in reducing smoking prevalence in its population with a comprehensive approach to tobacco control has been showcased as one of the world’s best practices in tobacco control. With tobacco control measures dating back to the 1970s, Singapore’s progress shows the value of comprehensive, long-term goals for public health through a progressive roll-out of complementary tobacco control measures, including tobacco taxation. The tobacco-related burden of disease in Singapore has decreased significantly from 1990 to 2017, for both males and females, compared to the global tobacco burden (See Figure 1). Singapore presents a good case study of a city-state that has imposed high tobacco taxes with strict law enforcement tackling illicit tobacco trade that led to increased tobacco tax revenues, and that benefits both public health objectives and the government’s economic objectives. This study aims to describe the policy measures that have been implemented by Singapore to address the evasion of its tobacco tax system through illicit tobacco trade.

Modelling the expected impact of cigarette tax and price increases under Vietnam’s excise tax law 2015–2020

BackgroundVietnam’s national tobacco control strategy aims to reduce the rate of smoking among male adults from 45% in 2015 to 39% by 2020. The aim of this paper is to...

The 20-year impact of tobacco price and tobacco control expenditure increases in Minnesota, 1998-2017.

Tobacco control programs and policies reduce tobacco use and prevent health and economic harms. The majority of tobacco control programs and policies in the United States are implemented at local and state levels. Yet the literature on state-level initiatives reports a limited set of outcomes. To facilitate decision-making that is increasingly focused on costs, we provide estimates of a broader set of measures of the impact of tobacco control policy, including smoking prevalence, disease events, deaths, medical costs, productivity and tobacco tax revenues, using the experience of Minnesota as an example. Using the HealthPartners Institute's ModelHealth™: Tobacco MN microsimulation, we assessed the impact of the stream of tobacco control expenditures and cigarette price increases from 1998 to 2017. We simulated 1.3 million individuals representative of the Minnesota population. The simulation estimated that increased expenditures on tobacco control above 1997 levels prevented 38,400 cancer, cardiovascular, diabetes and respiratory disease events and 4,100 deaths over 20 years. Increased prices prevented 14,600 additional events and 1,700 additional deaths. Both the net increase in tax revenues and the reduction in medical costs were greater than the additional investments in tobacco control. Combined, the policies address both short-term and long-term goals to reduce the harms of tobacco by helping adults who wish to quit smoking and deterring youth from starting to smoke. States can pay for initial investments in tobacco control through tax increases and recoup those investments through reduced expenditures on medical care.

Smoking Czechs: Modelling Tobacco Consumption and Taxation

We model the future tobacco consumption, size of smoking population and governmental tax revenues in the Czech Republic. The main model assumption states that smokers determine their future tobacco consumption behaviour as adolescents. Further assumptions make the model applicable to the data from the Czech National Monitoring Centre for Drugs and Drug Addiction. Future teenage smoking rates and average consumption are the inputs to the model; consumption growth coefficients for each age category are estimated using zero-inflated negative binomial regression. Several scenarios are built to model possible developments, including extreme cases. All our scenarios show that all model outcomes are going to grow until 2028 in a very similar pattern. In particular, the projected number of smokers in 2028 is by 4-8% higher than in 2013, the total daily tobacco consumption and tax revenue by 7-26%. This increase is induced by aging of large birth cohorts.

Raising cigarette excise tax to reduce consumption in low-and middle-income countries of the Asia-Pacific region:a simulation of the anticipated health and taxation revenues impacts

BackgroundAccording to the World Health Organization (WHO), 80% of the world’s smokers live in low- and middle-income countries. Moreover, more than half of the world’s smoking-addicted population resides in the Asia-Pacific region. The reduction of tobacco consumption has thus become one of the major social policies in the region. This study investigates the effects of price increases on cigarette consumption, tobacco tax revenues and reduction in smoking-caused mortality in 22 low-income as well as middle-income countries in the Asia-Pacific region.MethodsUsing panel data from the 1999–2015 Euromonitor International, the World Bank and the World Health Organization, we applied fixed effects regression models of panel data to estimate the elasticity of cigarette prices and to simulate the effect of price fluctuations.ResultsCigarette price elasticity was the highest for countries with a per capita Gross National Income (GNI) above US$6000 (China and Malaysia), and considerably higher for other economies in the region. The administered simulation shows that with an average annual cigarette price increase of 9.51%, the average annual cigarette consumption would decrease by 3.56%, and the average annual tobacco tax revenue would increase by 16.20%. The number of averted smoking-attributable deaths (SADs) would be the highest in China, followed by Indonesia and India. In total, over 17.96 million lives could be saved by tax increases.ConclusionExcise tax increases have a significant effect on the reduction of smoking prevalence and the number of averted smoking-attributable deaths. Middle- and upper-middle income countries would be most affected by high-taxation policies.

Halting the Comeback of “Kiddie Packs”: Defeating an Invisible Enemy

Background and context: “Kiddie packs”–packs of 10 or fewer cigarettes–have been banned in Malaysia in 2010. In August 2017, however, tobacco control civil society organizations (CSOs) were informed that the tobacco industry had approached the Malaysian government on this issue, claiming that a “return” would increase the government’s tobacco tax revenue. Unfortunately, this news was not formalised and CSOs were not allowed to reveal the source. We thus could not implement direction action organizing, and the media is much less likely to respond to “smoke without fires”. Aim: To stop the return of kiddie packs. Strategy/Tactics: Through discussions on a WhatsApp group, CSOs launched a “divide and conquer” battle. After a CSO took the risk and leaked the information to media (without revealing its source), many groups built on the voice, and “smoked out” the enemy. A few CSOs tackled a different front, including using social media to gather voices, rallying the support of policymakers, other ministers, and nonhealth civil societies, and coordinating a visit to the government. Program/Policy process: After a CSO disclosed the “kiddie pack” news to the largest selling daily newspaper, many groups followed up with interviews, media statements and letters. Meantime, another CSO reached out to its network of policymakers and nonhealth CSOs for support, and sent briefing points or draft “letters to the government” with key messages that tailored to the senders´ specialty (human rights, environment, etc.) When a protobacco retailer announced it had 3200 signatures from their members, one CSO launched an online petition on its Facebook page, shared the effects of kiddie packs on adolescents, and gathered 10 times the signature within a month. The final effort was a visit to the government - a tactic used by the e-cigarette industry previously - to submit the signatures and statement. Outcomes: The “leak” resulted in a front page coverage, allowing the Health Minister to state his views, and other CSOs to use it as a platform to voice their protest. It was also publicised in mainstream as well as online news in different languages. Within two weeks, the tobacco industry finally revealed its intention, and coordinated its media responses through its supporters. Each of these responses were met - point by point–by CSOs, resulting in at least 20 published “letters”. Nearly 40,400 (online and offline) signatures were gathered, representing 57 CSOs. To date, kiddie packs have not made a “return”. What was learned: Instant messaging applications and social media tools can replace meetings and on-the-ground efforts, especially when CSOs lack funds, time, and human resources. Also, great campaigns should consist of general (e.g., writing to the media) as well as specialized (social media, networking with policymakers) efforts. This allows different CSOs to focus their strengths, avoid redundant tasks or “working in silos”, and have every contribution count.

Analysis of Article 6 (tax and price measures to reduce the demand for tobacco products) of the WHO Framework Convention on Tobacco Control

ObjectiveTo analyse the extent to which parties to the WHO Framework Convention on Tobacco Control (FCTC) have implemented Article 6 since the convention’s entry into force.MethodsCompliance was measured using nine...

A simulation impact evaluation of a cigarette excise tax increase on licit and illicit cigarette consumption and tax revenue in 36 European countries.

To assess the impact of a simulated 10% tax-induced cigarette price increase on licit and illicit consumption and tax revenues in 36 European countries. Employing panel data for licit and illicit cigarette consumption, fixed effects regression models were applied for different income clusters. Total cigarette consumption dropped by about 3.1% as a result of the simulated tax-induced price increase. Annual illicit cigarette consumption increased by 1.52%, (95% confidence interval: 0.21, 2.83), while annual licit cigarette consumption decreased by 4.61% (95% confidence interval: -6.51, -2.72) in the observed 36 European countries. With total consumption decreasing by about 8%, the Czech Republic, Latvia, Lithuania, Poland and Slovakia were affected the most by the price hike. More specifically, licit consumption in these countries decreased by 18.43% (95% confidence interval: -19.91, -16.95) while illicit use increased by 10.99% (95% confidence interval: 6.01, 15.96). Moreover, the overall annual tobacco tax revenue increased by US$14.69 billion in the simulation. Results of the study suggest that European policy makers continue to implement tobacco taxation policies to control smoking prevalence and national health care expenditures. At the same time, efforts to kerb contraband activities along EU Eastern borders should be intensified.

Achieving an end to government tobacco tax revenues: another challenge for the tobacco endgame?

Achieving an end to government tobacco tax revenues: another challenge for the tobacco endgame?