Countries share examples of how tobacco tax policies create win-wins for development, health and revenues

Countries share examples of how tobacco tax policies create win-wins for development, health and revenues

In 2018 only 38 countries, covering 14% of the global population had sufficiently high tobacco taxes – which means taxing at least 75% of the cost of these health-harming products. By implementing proven policies like tobacco taxes, the costs created by the tobacco industry to local communities and nation can be avoidable.  It is a win for population health, revenue and for development.

How The Gambia substantially reduced cigarette use using tobacco taxation

In 2012, prices of cigarettes in The Gambia were among the lowest in the African region. With WHO support, the country made a plan to raise the price of cigarettes. It worked so well the country went on to implement an even more ambitious plan for tobacco tax increases in the following years. As a result, revenues generated in 2018 were nearly three times as high compared to 2011. Meanwhile, cigarette importation was reduced by over 60%. 

“The results of these plans exceeded our expectations,” said Mambury Njie, Honorable Minister of Finance and Economic Affairs of The Gambia. He said this convinced the country that in-creasing tobacco taxes is a win-win for bringing in more revenues while reducing demand. 

“I hope that our experience in The Gambia will encourage other countries to embark on their own reforms, particularly at these COVID-19 pandemic times when the need for domestic resource mobilization that is health inclusive is paramount,” he said.

Sri Lanka uses regular increases on excise tax to decrease cigarette consumption

Sri Lanka now proudly meets the highest level of achievement of taxation for cigarettes, with taxes reaching 77% of the price of the most sold brand. In line with best-practices in the WHO Tobacco Taxation manual, Sri Lanka primarily relies on a specific excise tax, meaning a tax levied on selected products based on quantity, such as number of cigarettes or weight of tobacco.

It increased the tax at regular intervals to effectively decrease the affordability, and  consumption of these deadly products.  However, much still needs to be done to reduce the high prevalence of tobacco use in the country.

“We are certain that following more of the best practice outlined in the manual will help us address these persistent challenges and improve the health of the Sri Lankan population,” said Nimal Siripala de Silva, Minister of Health of Sri Lanka.

Increase in taxation of cigarettes in Colombia causes 34% drop in cigarette consumption

In 2016, Colombia had the second-cheapest cigarettes in the Western hemisphere, second only to Paraguay (a large producer of tobacco products). 

As part of a larger fiscal reform in 2016, the specific tax rate for cigarettes was tripled from 2016 (COL$700 per pack) to 2018 (COL$2,100 per pack), with a 4% real increase per year after 2019. 

As part of a larger fiscal reform in 2016, the specific tax rate for cigarettes was tripled from 2016 (COL$700 per pack) to 2018 (COL$2,100 per pack), with a 4% real increase per year after 2019. 

Not only did cigarette consumption fall by 34% by 2018, but excise tax revenues, which are earmarked for funding of universal health coverage (UHC), almost doubled.

Therefore, the tobacco tax reform decreased tobacco consumption (along with associated death, disease, and costs); increased revenues; and contributed the financial sustainability of the UHC system.  A win-win-win for Colombia.

Additionally, illicit trade in tobacco products was treated with the same level of sanctions as money laundering.

“There are ways to do things right and Colombia followed the example of those that had walked this road in the past, which is something you see reflected in the manual, those experiences that helped administrators design the right policies, design the right ways of administering these taxes and produce benefits such as the reduction in consumption of harmful products that improves the health of the populations and if you can use the additional revenues to also deliver better health, well that is an extra plus and an extra benefit,” said Dr Mauricio Cardenas, former Finance Minister and Public Credit, Colombia.

Oman’s introduction of excise tax on tobacco led to substantial increases in tobacco prices that would effectively reduce tobacco use

After years of relying only on import duties for tobacco products, Oman introduced, as part of a joint decision from the Gulf Cooperation Council, a large excise tax in 2019 which led to large increases in prices making tobacco products less affordable. 

According to the WHO estimates, the share of tax in the price of the most sold brand of cigarettes increased from 25% to almost 64% between 2018 and 2020 thanks to the introduction of the excise tax. The price of the most sold brand almost doubled from 1.2 to 2.2 Omani rials during that same period. We expect this will have a substantial impact on reducing tobacco use and uptake, especially the youth.

“I would like to [thank] the WHO for updating the technical manual on tobacco tax policy and administration, which is an important milestone for countries who wish to increase the effectiveness of their tax policies to reduce the burden of tobacco us. Focusing on tobacco taxes will also be very instrumental in the post-Covid-19 recovery efforts to raise more funds for health,” said Ahmed Mohammed Obaid Al Saidi, Minister of Health, Oman.

“Sin Tax” expands health coverage in the Philippines

The famous 2012 “Sin Tax” reform of the Philippines, which led to substantial reductions in tobacco use and increases in revenues used for UHC, has been very widely disseminated as a key success story on tobacco taxation (Read here for more details about the Sin Tax Reform). The Philippines has not stayed idle since. 

The Philippines successfully foiled industry attempts to change the uniform tax structure for cigarettes under the Sin Tax Law of 2013. Cigarette taxes are now at their highest with increases of five pesos annually until 2023, and with automatic increases of 5% thereafter. 

Through improved tax administration and stricter enforcement, the government penalized a domestic tobacco company for tax evasion in 2017, this resulted in the biggest tax settlement in Philippines history amounting to $US 600 million. 

Excise taxes were also introduced on heated tobacco products and e-liquids used in electronic cigarettes. The structure for the excise tax on  heated tobacco products is the same as for cigarettes, which is considered best practice. Moreover, unlike most countries, an excise tax is also imposed on those products’ devices.

The tobacco and alcohol taxes earmarked for Universal Health Care were also redefined to be clearer and expanded to cover the sugar sweetened beverages tax. These generate more revenues for the health sector.

“The Philippine experience highlights what a strong political will can do to protect people from consuming products that have a deleterious impact on their health. It also shows how the government can overcome powerful vested interests in order to deliver long overdue reforms. We hope to further improve our tobacco tax policy and administration by observing the benchmarks and best practices contained in the manual that the World Health Organization brings to the public today,” said Carlos G. Dominguez III, Secretary of Finance, Philippines.

Source: WHO