Article Six of the Framework Convention on Tobacco Control (FCTC) of the World Health Organization requires that Parties to the
treaty consider tax policies and price polices as a part of their overall national health policy and recommends that governments raise tobacco taxes to reduce tobacco consumption as far as possible.
The most direct and effective method for reducing tobacco consumption is to increase the price of tobacco products through tax increases. Higher tobacco prices encourage cessation among existing tobacco users, prevent initiation among potential users (non-smoking youth), and reduce the quantity of tobacco consumed among continuing users.
Higher taxes are particularly effective in reducing tobacco use among vulnerable populations, such as youth, pregnant women, and low-income smokers.
Reducing tobacco use
An increase in tobacco taxes by 10 percent decreases tobacco consumption by four percent in high-income countries and by about eight percent in low- and middle-income countries. Tobacco taxes are one of the single most effective ways of reducing tobacco use, with studies showing that a price increase of 10 percent would reduce the number of smokers by 42 million worldwide and save 10 million lives (overall consumption by four percent and youth smoking by seven percent).
Similarly, tax increases directly benefit governments through increased revenues. Every nation and sub-national entity that has significantly increased its tobacco tax has enjoyed substantial increases in revenue, even while reducing smoking. Tax increases that raise real price of cigarettes by 10 percent worldwide would increase revenues on average by about seven percent.
The World Bank recommends setting tobacco taxes to between two-thirds to four-fifths of retail price. Few low-and middle-income countries achieve this level of taxation, and most can significantly increase their tax levels.
The findings of a study published recently by the American Journal of Public Health provides important new evidence that cigarette tax increases and mass media public education campaigns can significantly reduce smoking.
The study adds to the overwhelming body of evidence that these solutions work and should encourage governments to take urgent actions to protect the health of their citizens from tobacco use, the world’s leading cause of preventable death.
The study, conducted by a team of Australian researchers, examined the impact of several tobacco control policies on adult smoking rates in Australia over a 10 year period. The study found that government action can effectively reduce tobacco use.
The key findings are as follows:
?? Higher cigarette prices resulting from tax increases led to rapid reductions in adult smoking rates, even when controlling for other factors. According to the study, increases in the cost of a pack of cigarettes created measurable declines in smoking rates.
?? Well-funded and sustained tobacco control media campaigns significantly reduced smoking rates. The study concludes that media campaigns must be adequately funded to ensure sufficient exposure to the public and must be sustained over time.
The results of the study demonstrate that raising the price of tobacco by increasing tobacco taxes will reduce in smoking, but an even greater impact can be achieved by using some of the revenue from the tobacco tax to fund a sustained media campaign.
These proven measures are a part of a package of six cost-effective solutions for reducing tobacco use, called the MPOWER package that the World Health Organization has recommended every nation to implement.
??Monitor tobacco use and assess the impact of tobacco prevention and cessation efforts.
?? Protect everyone from secondhand smoke with laws that require smoke-free workplaces and public places.
?? Offer help to every tobacco user to quit.
?? Warn and effectively educate every person about the dangers of tobacco use with strong, pictorial health warnings and hard-hitting, sustained media campaigns.
?? Enact and enforce comprehensive bans on tobacco advertising, promotion and sponsorships and on the use of misleading terms such as ‘light’ and ‘low-tar,’ and
?? Raise the price of tobacco products by significantly increasing tobacco taxes.
Additionally the WHO has found that consumer mass media campaigns are effective in educating the public on the dangers of smoking, countering the tobacco industry’s marketing and promotional tactics and reducing tobacco use.
According to the WHO, tobacco use is the leading cause of preventable death in the world today which will kill one billion people worldwide this century unless nations act now to save lives. Tobacco use already kills 5.4 million people a year and the epidemic is worsening, especially in the developing world where more than 80 percent of tobacco-caused deaths will occur in the coming decades. However, this epidemic is entirely preventable if nations urgently implement proven solutions.
The cigarette companies have opposed tobacco tax increases by arguing that raising cigarette prices would not reduce adult or youth smoking. But the internal documents of tobacco industry disclosed in the tobacco lawsuits, show that they know very well that raising cigarette prices is one of the most effective ways to prevent and reduce smoking, especially among children.
Economic research confirms that cigarette tax increases reduce smoking. Numerous economic studies in peer-reviewed journals have documented that cigarette tax or price increases reduce both adult and underage smoking. The general consensus is that every 10 percent increase in the real price of cigarettes reduces overall cigarette consumption by approximately three to five percent, reduces the number of young-adult smokers by 3.5 percent and reduces the number of children who smoke by six or seven percent.
Research studies have also found that cigarette price and tax increases work even more effectively to reduce smoking among males and lower-income smokers. A cigarette tax increase that raises prices by ten percent will reduce smoking among pregnant women by seven percent, preventing thousands of spontaneous abortions and still-born births and saving tens of thousands of newborns from suffering from smoking-affected births and related health consequences.
Raising cigarette taxes reduces smoking especially among children which is known to tobacco industry. Higher taxes on smokeless tobacco reduce its use, particularly among young males; and increasing cigar prices through tax increases reduce adult and youth cigar smoking. It is also proved that cigarette price increases not only reduce youth smoking, but also reduce both the number of children who smoke marijuana and the amount of marijuana consumed by continuing users. By reducing smoking levels, cigarette tax increases reduce secondhand smoke exposure among nonsmokers, especially children and pregnant women.
In every single state that has significantly raised its cigarette tax rate, pack sales have gone down sharply. While some of the decline in pack sales comes from interstate smuggling and from smokers going to other lower-tax states to buy their cigarettes, reduced consumption from smokers quitting and cutting back plays a more powerful role. As shown in more detail, below, nationwide data - which counts both legal in-state purchases and the vast majority of packs purchased through cross-border, Internet, or smuggled sales shows that overall packs sales go down as state cigarette tax increases push up the average national price.
There is evidence which shows that state cigarette tax increases are prompting many smokers to quit or cutback. The Expert Conclusions on Cigarette Prices and Smoking Levels in its 2007 report, Ending the Tobacco Problem: A Blueprint for the Nation, the National Academy of Sciences’ Institute of Medicine recommends raising cigarette taxes in states with low rates and indexing them to inflation, to reduce cigarette consumption and to provide money for tobacco control. The report states, “Tobacco excise tax revenues pose a potential funding stream for state tobacco control programs”.
‘Setting aside about one-third of the per-capita proceeds from tobacco excise taxes would help states fund programs at the level’ suggested in The President’s Cancer Panel’s 2007 report, Promoting Healthy Lifestyles; advised increasing state tobacco taxes, stating, ” Increases in tobacco excise taxes, which are passed along to consumers in the form of higher tobacco product prices, have proven highly effective in reducing tobacco use by promoting cessation among current users, discouraging relapse among former users, preventing initiation among potential users and reducing consumption among those who continue to use tobacco. These revenues also provide crucial dollars needed to fund anti-tobacco efforts.”
The 2000 US Surgeon General’s Report, Reducing Tobacco Use, found that raising tobacco-product prices decreases the prevalence of tobacco use, particularly among kids and young adults, and that tobacco tax increases produce “substantial long-term improvements in health.” From its review of existing research, the report concluded that raising tobacco taxes is one of the most effective tobacco prevention and control strategies.
The Wall Street tobacco industry analysts have long recognized the powerful role of increasing cigarette taxes and rising cigarette prices play in reducing U.S. smoking levels. For example, the December 1998 “Sensitivity Analysis on Cigarette Price Elasticity” by Credit Suisse First Boston Corporation settled on a ‘conservative’ estimate that cigarette consumption will decline by four percent for every 10 percent increase in price.
The National Academy of Sciences’ Institute of Medicine, in its 1998 report, Taking Action to Reduce Tobacco Use, concluded that “the single most direct and reliable method for reducing consumption is to increase the price of tobacco products, thus encouraging the cessation and reducing the level of initiation of tobacco use.”
By Manjari Peiris