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Tobacco taxation

The Addis Agenda supports price and tax measures on tobacco as an effective and important means to reduce tobacco consumption and health-care costs, and represent a revenue stream for financing for development in many countries, especially if implemented as part of a comprehensive strategy of prevention and control.

 

Tobacco tax policies

Information to track the progress on implementation of tobacco tax related policies is available from the World Health Organization (WHO), which conducts biannual global surveys of tobacco prices and taxes that is available in the WHO report on global tobacco epidemic. According to the World Health Organization, raising tobacco taxes to more than 75% of the retail price is among the most effective and cost-effective tobacco control interventions. Only 32 countries are currently meeting this Practice.

 

Raising tobacco taxes is the least implemented measure to control tobacco demand – with only 10% of the world’s people living in countries with sufficiently high taxes. This highlights the opportunity for greater gains still to be made globally, but particularly in developing countries.

In addition, the Bulletin of the World Health Organization published a study in April 2016 that modelled the impact of raising cigarette taxes on public health and finance. The study predicts that raising tobacco taxes by approximately $1.00 (converted at purchasing power parity exchange rates) per pack of cigarettes could prevent more than 14 million smoking-attributable deaths throughout the world, while reducing the sale of cigarettes by more than 53 billion packs, and raising more than $190 billion. The figure shows that the largest revenue increases and reduction in daily smokers would occur in the Western Pacific region, as defined by the WHO. The European region, followed by the Americas would see the next most revenue, while the South-East Asia would see the second largest reduction in the number of smokers.

Note: International dollars are based on the purchasing power parity exchange rates for 2014. Countries categorised by WHO regions.

 
Tobacco tax structures

Taxes on tobacco, alcohol and sugar-sweetened beverages can potentially reduce consumption of these items, compensate society for increased health-system costs, and increase resources for the health sector. Excise taxes for tobacco control are most frequently used. Different types of excise structures, based on either quantities or value, are applied to tobacco products as shown in the figure. Additionally, 35 countries have complex systems, with different (tiered) taxes that are applied to the same product based on sometimes minor differences in product characteristics, which opens loopholes for industry tax avoidance. The World Health Organization (WHO) recommends tobacco tax reforms that close loopholes by implementing single-rate, specific excise taxes that are frequently adjusted upwards. Currently, only 16 countries have automatically adjusted specific excise taxes.

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