Tobacco tax: good for health, government finances Tobacco use kills over 5 million people each year and is the largest single preventable cause of premature death. l Tobacco is very costly to society through high costs to treat tobacco-induced disease or through loss of productivity as a result of the premature deaths. But governments have a tool to combat the costs of tobacco use ” tobacco taxation.
Higher tobacco prices decrease consumption and encourage people to quit Increasing the price of tobacco products Is the single most effective way to reduce consumption-2 Ralslng prices discourages uptake of tobacco se by young people and motivates people to quit tobacco use, while raising government revenues. 3 Numerous studies in high income countries have shown that a 10% increase in cigarette price decreases consumption by about 4%. 4 Available data indicate that consumption in low and middle income countries is even more responsive to price.
For example, the estimated decreases would be about 5. 5% in China, 5. 2% in Mexico and 5. 4% in South Africa.
Tobacco And Poverty
Those living on lower incomes are more likely to smoke, and policy makers are sometimes concerned that increasing tobacco tax will penalise people who are already living in reduced circumstances.
But it is important to note that poorer smokers are also the most price sensitive ” in other words, they are the most likely to quit or reduce their consumption of tobacco when taxes are increased. This has been confirmed in multiple studies. For example, when tobacco excise was increased in South Africa over several years in the mid to late 1990s, the largest reductions in smoking prevalence were seen among young people and low-income earners. When smokers quit, their families benefit in two ways: through improved health and through improved finances ” money previously spent on tobacco products can be spent on food, education and other necessities. If policy makers are concerned about the economic impact of tobacco tax increases on low-income smokers who do not reduce their consumption, they can invest part of the added tobacco tax revenue in social spending. In addition to savings to the public sector, business can also benefit from a healthier workforce, with lower absenteeism and fewer losses of skilled workers through early retirement due to illness or early death.
A cost-benefit analysis in the I-JK showed that a 5% tobacco tax increase over the rate of inflation would increase government tax revenues by over IJS$814 million a year and result in wider economic benefits of over $440 million per year in the first five years of the policy. 18 Tobacco use is the one risk factor common to the main groups of NCDs. Accelerated implementation of the FCTC is an essential way to tackle NCDs and save lives. 1 World Health Organization (2009) WHO report on the global tobacco epidemic 2008.
Geneva: World Health Organization. 2 World Health Organization (2004) Building blocks for tobacco control: a handbook. Geneva: World Health Organization. 3 Jha P Chaloupka F. (1999) Curbing the epidemic: governments and the economics of tobacco control. Washington, DC: World Bank. 4 World Health Organization (2010) WHO technical manual on tobacco tax administration. Geneva: World Health Organization. 5 Hu T-w, Mao Z, Shi J, Chen W (2008) Tobacco taxation and its potential impact in China.
Paris: International Union Against Tuberculosis and Lung Disease. Tobacco tax increases benefit the economy Governments benefit directly from tobacco tax increases. Increased revenue can pay for tobacco control interventions, combating infectious isease or other priority national programmes. Countries with efficient tax systems have benefitted from substantial tax increases.