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In the global fight against tobacco epidemic, what is the progress on tobacco taxation?

August 09, 2019

The World Health Organization (WHO) recently published the report of the global tobacco epidemic 2019, which aims to monitor the strategies outlined in the MPOWER package of effective tobacco control measures.

The MPOWER package complies the following measures: Monitor tobacco use and prevention policies, Protect people from tobacco smoke, Offer help to quit tobacco use, Warn about the dangers of tobacco, Enforce bans on tobacco advertising, promotion and sponsorship; and Raise tobacco taxes.

The last measure is based on article 6 of the Framework Convention on Tobacco Control (FCTC), which establishes that price and tax measures are effective and important to reduce tobacco consumption.

As the literature bases, increasing tobacco tax in countries has great advantages: i) it is highly cost effective to reduce tobacco consumption and increases government revenue and ii) it can help expand health sector financing. But, for a better impact of the tax, it must be meaningfully and periodically updated; and there must be good customs administrations to solve the problems associated with illicit trade.

According to WHO figures, the tax measure is the least achieved of the MPOWER package. By 2018, only 14% of the world's population lived in countries with sufficiently high taxes. For 8 years, the population protected by this measure was under half a million people, and in the last two years alone, this figure increased to more than one billion people.

Countries can be categorized according to the value of the tax as a percentage of the sales price, as follows: i) <25% of the sales price is tax, ii)> 25% and <50% of the sales price is tax, iii) > 50% and <75% of the sale price is imposed, and iv)> 75% of the sale price is imposed. This last category is the WHO recommendation.

The majority of countries that have already adopted higher taxes are high-income countries, 23 of these countries have taxes equal to or greater than 75% of the sales price. While only 11% (5 countries) of low middle income countries have adopted high taxes.

Since 2016, 10 countries have increased their taxes to the highest category (> 75%), 7 out of the 10 countries are of low middle income, and 2 are from the Americas region: Colombia and Brazil. Colombia tripled its taxes in two years, its specific tax per 20 cigarettes went from 700 COP in January 2017 to 2100 COP in January 2018. Regarding the impact of the measure, there was a 54% increase in tax collection specific, and a reduction in cigarette sales of 23% compared to 2016. On the other hand, Brazil went from being one of the six cheapest cigarettes in the world to having one of the highest tax rates as a percentage of the sales price (82.97%) of the region, by significants increases since 2007.

In terms of affordability, progress is also higher in high income countries compared to low-middle income countries. In 30 countries, cigarettes became more affordable, of those 30 countries, 28 are low middle income. Affordability is important because cigarettes consumption is not discouraged, even when the price goes up, if the product is more affordable over time. Therefore, it is necessary that price is indexed with household income.

In conclusion, since 2008, the number of countries implementing higher taxes has almost doubled, and about one in five countries is now protected. But the progress could have been much greater if the strategies of the Tobacco Industry (TI) were not working. In the case of tobacco taxes, it has been popular, by industry, to use alarming and inflated figures of illegal trade to undermine the measure.

In turn, it is necessary that this measure be updated according to the new strategies devised by the IT. Therefore, it is necessary to take action before the new bet of electronic nicotine delivery systems (ENDS). Although the ENDS can be classified as less toxic than cigarettes, it has been proven that their aerosol does not simply "water vapour" as IT declares; In addition, its consumption increases non-smoking exposure to nicotine and other highly toxic products. It is imperative that the tax legislation also covers these new products in order to prevent the increase in their use, especially in young people.

Clearly, decision makers should not follow the arguments presented by the industry, when there is extensive evidence on the cost-effectiveness and the impacts of the tobacco tax measure in the countries of the region. The tobacco tax measure should be a priority to protect the new generations from the smoking epidemic, even in its newest presentations.