May 27, 2014
On World No Tobacco Day (31 May), the World Health Organization (WHO) in the Western Pacific Region urges governments to raise taxes on tobacco products. Two people die each minute from tobacco-related diseases in the Region, which is home to one-third of the world’s smokers.
“Increasing the price of tobacco products through taxation is a win-win situation. It promotes health by discouraging people to take up this deadly habit and it also increases revenues which can be channelled towards initiatives for health or social welfare,” noted Dr Susan Mercado, Director, Building Healthy Communities and Populations, Western Pacific Region, during the opening of a regional workshop on tobacco taxation and illicit trade organized by Southeast Asian Tobacco Control Alliance (SEATCA) and hosted by the WHO Regional Office for the Western Pacific in Manila last week. “The only ones that lose are the tobacco companies,” Dr Mercado added.
The WHO Framework Convention on Tobacco Control (WHO FCTC) recommends tax and price policies on tobacco products as a way to reduce consumption. Evidence shows that price increases on cigarettes are highly effective in reducing demand in countries of all income levels. Higher prices induce cessation and prevent initiation of tobacco use. They also reduce relapse among those who have quit and reduce consumption among continuing users. Research also shows that higher taxes are effective in reducing tobacco use among lower-income groups and in preventing young people from starting to smoke.
The World Health Report 2010 indicated that a 50% increase in tobacco excise taxes would generate more than US$ 1.4 billion in additional funds in 22 low-income countries. In countries such as the Lao People’s Democratic Republic and Viet Nam, the extra revenue can represent 10% and more of total expenditure on health, providing means to increase government expenditure and reduce the burden of out-of-pocket expenditure.
WHO is committed to help governments design intelligent tobacco tax policies that best satisfy these dual goals of tobacco use reduction and revenue generation. In the Western Pacific Region, WHO has worked closely with the ministries of finance of Cambodia, China and Viet Nam to review existing excise tobacco taxation on tobacco and explore ways to configure tax policy and administration to improve revenue collection and reduce tobacco consumption.
Cambodian officials from the Ministry of Economy and Finance together with WHO and SEATCA assessed the Cambodian tobacco tax system in 2012. The collaboration involved evaluating the strengths and weaknesses of the current tobacco tax system, and subsequently assessing the impact of a different tax policy proposal designed to improve tax revenue and public health outcomes for Cambodia.
Since 2007, WHO has engaged with the Ministry of Finance of China and collaborated with researchers in the Central University of Finance and Economics and Johns Hopkins Bloomberg School of Public Health. In consultation with the Research Institute for Fiscal Science of the Ministry of Finance, the team examined available evidence on demand for cigarettes for the overall population and youth, and the impact of taxes on the economy of China using input-output analysis. WHO continues to collaborate with the Ministry of Finance through technical support for analysis of the Chinese tax system, administration and policy process.
Officials from the Ministry of Finance of Viet Nam took part in a tax workshop organized by the WHO Regional Office for the Western Pacific and received technical assistance from WHO on tobacco tax administration and implementation issues. Tax administrators prepared a document for the Ministry of Finance specifying areas of improvement in the current excise system, administration and implementation.
Pacific island countries have a Pacific Tobacco Taxation Project to help countries increase tobacco taxes through workshops, meetings and country-based technical missions. Several countries have successfully taken measures to increase taxes on cigarettes.
§ In 2013, Cook Islands budget included a 33% increase on the import tax for cigarettes.
§ Fiji successfully increased the excise duty on both cigarettes and alcohol by 10% in 2012.
§ In Papua New Guinea, the 2012 budget included a 15% increase in tobacco excise tax, and the 2013 budget included a further 10% increase.
§ In Tonga, the 2013 tobacco taxation proposal includes a 15% increase in average price per pack in year one, a 15% increase in year two, and a 13% increase in year three.
In the Philippines, President Benigno S. Aquino III, one of the recipients of the World No Tobacco Day Awards 2013, signed Republic Act 10351 or the Sin Tax Bill into law on 20 December 2012. Incremental revenues from the law will be used to fund health premium subsidy of the poor, fund the upgrading and modernization of government hospitals and facilities, expand public health programmes, such as immunization to achieve the Millennium Development Goals, hire health workers, and fund health promotion and implementation research to support Universal Health Coverage.
The tobacco epidemic is one of the biggest public health threats, killing nearly 6 million people a year. More than 5 million of those deaths are the result of direct tobacco use while more than 600 000 are the result of non-smokers being exposed to second-hand smoke. Approximately one person dies every six seconds due to tobacco, accounting for one in 10 adult deaths. Up to half of current users will eventually die of a tobacco-related disease.
Unchecked, tobacco-related deaths will increase to more than 8 million annually by 2030. More than 80% of those deaths will be in low- and middle-income countries. Moreover, if current trends continue, tobacco may cause 1 billion deaths in this century.
Every year, Dr Margaret Chan, WHO Director-General, recognizes people and institutions that have made outstanding contributions to the advancement of the policies and measures contained in the WHO FCTC and its guidelines. There are six awardees from each region and globally there are two recipients of the WHO Director-General Special Recognition Award. This year, one of these special recognition awards has been granted to SEATCA.
“This award recognizes the valuable contribution of SEATCA as a regional ally especially in the area of tobacco taxation. SEATCA is a key catalyst and leader in tobacco tax reform in the ASEAN community bringing together various stakeholders and working closely with ministries of health and finance” says WHO Regional Director for the Western Pacific, Dr Shin Young-soo. “Increasing the retail price of tobacco products through higher taxes is the single most effective way to reduce the demand for tobacco.”