APPENDIX 1

25 Jun 2013

Successful tobacco tax policies —a reminder (“The Basics”) 

The Article 6 Guidelines provide a great opportunity to recommend that governments establish long-term tobacco taxes, with regular increases and potential targets. However, they will probably not magically convince your government officials to increase tobacco taxes.

You will still need to make the usual health and economics case for increases, and provide the usual evidence to support your arguments.

For quick reference, here are hard numbers and visuals to help you argue “The Basics”:

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a. Low-income country example: Bangladesh

Figures 1 & 2. Bangladesh. Source: Barkat A, Chowdhury AU, Nargis N, Rahman M, Kumar PkA, Bashir S, Chaloupka FJ. The Economics of Tobacco and Tobacco Taxation in Bangladesh. Paris: International Union Against Tuberculosis and Lung Disease, 2012. Available on-line.

b. Lower-middle-income country example #1: Indonesia

 

Figure 3. Indonesia. Source: Barber S, Adioetomo SM, Ahsan A, Setyonaluri D. Tobacco Economics in Indonesia. Paris: International Union Against Tuberculosis and Lung Disease, 2008. Available on-line.

c. Lower-middle-income country example #2: Egypt 

Figures 4 & 5. Egypt. Source: Hanafy K, Saleh ASE, Elmallah MEBE, Omar HMA, Bakr D, Chaloupka FJ. The Economics of Tobacco and Tobacco Taxation in Egypt. Paris: International Union Against Tuberculosis and Lung Disease, 2010. Available on-line.

d. Upper-middle-income country example: Mexico

Figure 6. Waters H, Sáenz de Miera B, Ross H, Reynales Shigematsu LM. The Economics of Tobacco and Tobacco Taxation in Mexico. Paris: International Union Against Tuberculosis and Lung Disease, 2010. Available on-line.

{/arijaccordionitem} {arijaccordionitem title=”2. Increases in real price lead to decreases in death and disease.”}


Figure 7. France: Cigarette consumption, real price, and lung cancer rates in young males, 1980-2004. Source: Jha, P. Avoidable global cancer deaths and total deaths from smoking. Nature Reviews: Cancer. 9: September 2009, 655-664. Available on-line.

 

Table 2. EU: An estimated 10% increase in tobacco tax across 12 European countries would have led to a decrease of 1707 avoidable deaths in these countries in just the first year (1993 was the year calculated).
 
Source: Escario, J. J. and Molina, J. A.(2004) ‘Will a special tax on tobacco reduce lung cancer mortality? Evidence for EU countries’, Applied Economics, 36: 15, 1717-1722 Available on-line.
USA: Liu et al. analysed cigarette taxes against mortality rates from respiratory cancer in U.S. states from 1954 to 2005. Their analysis concluded that a 10% increase in the real excise tax rate leads to a 2.5% reduction in the respiratory cancer mortality rate (statistically significant at the 1% level, meaning that a reduction of this level would only occur by chance 1% of the time). Based on the U.S. population level in 2006, this would translate into 3,922 fewer deaths per year.
Liu E, Yu WC, Hsieh HL. Cigarette taxes and respiratory cancers: New evidence from panel co-integration analysis. J. Health Care Finance, 2011; 37(3):62–71. Available on-line.

{/arijaccordionitem} {arijaccordionitem title=”3. Increases in taxes lead to increases in government tax revenues in the short and medium term.”}

 a. Lower-middle-income country example: Indonesia

 

Figure 8. Indonesia. Djutaharta T, Surya HV, Pasay NHA, Hendratno and Adioetomo SM. Aggregate analysis of the impact of cigarette tax rate increases on tobacco consumption and government revenue: The case of Indonesia. HNP Discussion Paper, Economics of Tobacco Control Paper No. 25. World Bank: Washington, DC, January 2005. Available on-line.

b. Upper-middle-income country example #1: Venezuela 

Figure 9. Venezuela. Yurekli A., based on IMF / WBI figures.

c. Upper-middle-income country example #2: China.

 

Figure 10. China. Yurekli A., 2000. Available on-line.  (Slide 48)
 
Figure 11. Sweden. Yurekli A., based on IMF / WBI figures.

{/arijaccordionitem} {arijaccordionitem title=”4. Increases in taxes need not increase tobacco smuggling.”}

a. High-income country example #1: UK

Figures 12-14 show that real prices of tobacco products in the UK rose steadily from 2000 – 2010, while the level of smuggling of both manufactured cigarettes and hand-rolled tobacco declined during the same period.

 

Figure 12.  UK. Source: Reed H, Landman Economics. The Effects of Increasing Tobacco Taxation: A Cost Benefit and Public Finances Analysis. A report prepared for ASH UK. Available on-line.

 

Figures 13 & 14 UK. Source: UK HM Revenue & Customs and UK Border Agency, Home Office. Tackling tobacco smuggling – building on our success. April 2011. Available on-line.

b. High-income country example #2: Spain


Figure 15. Graph created from data in: Joossens L. Report on smuggling control in Spain. Tobacco Free Initiative Success Stories series. World Health Organization. No date. Available on-line.

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