Tobacco taxes and illicit cigarette trade in Colombia

Would plain packaging and health warning labels reduce smoking in the presence of informal markets? A choice experiment in Colombia

BACKGROUND

Despite progress made by many countries on the adoption of plain tobacco packaging laws over the last years, low- and middle-income countries, with a large supply of loose cigarettes via informal vendors, remain far behind.

AIM

To study the potential effectiveness of plain tobacco packaging and dissuasive cigarette sticks, via willingness-to-pay estimates, when illicit cigarette options are available.

METHODS

We conducted a discrete choice experiment (DCE) in which respondents chose licit and illicit products with three attributes: packaging (standard vs. plain packaging), stick design (branded stick vs. stick with warning), and price level. The sample, collected on 12/2021, consisted of 1761 respondents from an internet panel involving smokers and nonsmokers. Conditional logit and latent class models were used to estimate the willingness-to-pay (WTP) to avoid restrictive packaging elements.

RESULTS

Nonsmokers are willing to pay USD $5.63 for a pack of cigarettes to avoid plain packaging, which is higher than the actual commercial price of illicit cigarettes (USD $2.40). The WTP increases to USD $12.14 in the presence of illicit alternatives. Smokers are also willing to pay to avoid illicit options, which they also deem riskier, and the presence of such options increases the WTP to avoid plain packaging. However, nonsmokers do not perceive the illicit option as riskier. The dissuasive stick (stick with warning) does not affect perceptions of risk and plays a small role in terms of choice for both smokers and nonsmokers.

CONCLUSIONS

Even in the presence of illicit tobacco alternatives, plain packaging seems to be as effective in reducing the attractiveness of tobacco products in Colombia as in other countries that have already adopted it. Given conflicting results on the case for dissuasive sticks, there is a need for more research.

Tobacco industry pricing strategies for single cigarettes and multistick packs after excise tax increases in Colombia

INTRODUCTION

Taxes on tobacco products are an efficient way of reducing consumption. However, they are only effective if passed on to consumers with higher prices. This study aims to examine tobacco industry (TI) pricing strategies in response to tax increases, and whether they differ by price segments or presentation (packs or individual sticks) in Colombia. This is the first such academic study in Latin America and the first anywhere to include the market for single sticks.

METHODS

Using data on cigarette pricing/taxation from a survey of smokers (2016-2017) and official government data on pricing (2007-2019), the TI's pricing strategies were examined, split by brand, price segments, different sized packs and single cigarettes.

RESULTS

The TI employed targeted pricing strategies in Colombia: differentially shifting taxes; and launching new brands/brand variants. The industry overshifted taxes when increases were smaller and predictable, but used undershifting more when there was a larger increase in 2017, after which it mostly overshifted on budget and premium (but undershifted mid-priced) brands. The prices for single sticks increased more than the tax increase in 2017 when their consumption also increased.

CONCLUSION

The pricing strategies identified suggest excise taxes can be increased further, particularly the specific component, to reduce the price gap between brand segments. Brands should be restricted to a single variant along with prohibitions on launching new brands/brand variants. Lastly, since the pricing of single sticks does not match the pattern of packs, more monitoring of their sales and distribution is required, especially since they promote consumption and hinder effective implementation of tobacco tax policies.

The health, economic and social burden of smoking in Argentina, and the impact of increasing tobacco taxes in a context of illicit trade

Tobacco tax increases, the most cost-effective measure in reducing consumption, remain underutilized in low and middle-income countries. This study estimates the health and economic burden of smoking in Argentina and forecasts the benefits of tobacco tax hikes, accounting for the potential effects of illicit trade. Using a probabilistic Markov microsimulation model, this study quantifies smoking-related deaths, health events, and societal costs. The model also estimates the health and economic benefits of different increases in the price of cigarettes through taxes. Annually, smoking causes 45,000 deaths and 221,000 health events in Argentina, costing USD 2782 million in direct medical expenses, USD 1470 million in labor productivity loss costs, and USD 1069 million in informal care costs-totaling 1.2% of the national gross domestic product. Even in a scenario that considers illicit trade of tobacco products, a 50% cigarette price increase through taxes could yield USD 8292 million in total economic benefits accumulated over a decade. Consequently, raising tobacco taxes could significantly reduce the health and economic burdens of smoking in Argentina while increasing fiscal revenue.

Tobacco Taxes as the Unsung Hero: Impact of a Tax Increase on Advancing Sustainable Development in Colombia

Objective: Tobacco taxes are a well-established cost-effective policy to prevent Noncommunicable Diseases. This paper evaluates the expected effects of a tobacco tax increase on the Sustainable Development Goals in Colombia. Methods: We use microsimulation to build an artificial society that mimics the observed characteristics of Colombia's population, and from there we simulate the behavioral response to a tax increase of COP$4,750 (an increase that has been discussed by policy makers and legislators) and the subsequent effects in all SDGs. Results: The tobacco tax hike reduces the number of smokers (from 4.51 to 3.45 MM smokers) and smoking intensity, resulting in a drop in the number of cigarettes smoked in Colombia (from 332.3 to 215.5 MM of 20-stick packs). Such reduction is expected to decrease premature mortality, healthcare costs, poverty and people facing catastrophic expenditure on healthcare, to increase health, income and gender equity, and to strengthen domestic resource mobilization even in the presence of illicit cigarettes. Conclusion: Tobacco taxes are an effective intervention for public health and a powerful instrument to advance on the 2030 Sustainable Development Agenda. Relevance: A comprehensive analysis of the impact of tobacco taxes on all areas of Sustainable Development is missing in the empirical literature. Such perspective is needed to break the barriers for further tobacco tax increases by gathering wider societal support, especially from stakeholders and key decision makers from development areas other than health. SDG Nr: SDG3 (health), SDG 1 (no poverty), SDG 4 (education), SDG 5 (gender equality), SDG6 (water), SDG10 (inequality), SDG12 (responsible production and consumption), SDG17 (partnerships).

Illicit trade in tobacco products: recent trends and coming challenges

BACKGROUND

Illicit trade in tobacco products is a menace to the goal of eliminating tobacco consumption. Although tax policy is very effective in reducing consumption, illicit trade can reduce (though not eliminate) its effectiveness.

METHODS

This article discusses the recent evolution of illicit trade and the context in which it occurred; the new methods that have been developed to measure it and, finally, the challenges in the next phase in the control of illicit trade.

RESULTS

There has been a remarkable stability in the penetration of cigarette illicit trade in the past decade. Such a stability, however, occurred in a world of shrinking tobacco consumption, implying a decreasing absolute illicit trade. Most countries have progressed in increasing tobacco taxes and changing tax structures. Prices of illicit cigarettes follow legal cigarette prices. Concomitantly, many new studies, independent from the tobacco industry, have been conducted allowing for better understanding of the illicit trade and providing inputs to its solution. The entry into force of the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products provides both a global and a national policy framework to further curb illicit trade. Instruments such as track-and-trace systems must be promoted and adopted to maximise reductions in illicit trade.

CONCLUSIONS

Global efforts to curb the illicit trade in tobacco products are gaining momentum and progress has been made in many parts of the world. The next decade can witness a decisive decrease in tobacco consumption, both licit and illicit, if countries further engage in international collaboration.

Measuring anomalies in cigarette sales using official data from Spanish provinces: Are the anomalies detected by the Empty Pack Surveys (EPSs) used by Transnational Tobacco Companies (TTCs) the only anomalies?

INTRODUCTION

There is a literature that questions the veracity of the studies commissioned by transnational tobacco companies (TTCs) to measure the illicit tobacco trade. Furthermore, there are studies that have indicated that the empty pack surveys (EPSs) ordered by TTCs overestimate the size of this trade. This study simultaneously analyzed whether the EPSs established in each of the 47 Spanish provinces were accurate and measured anomalies observed in provinces where sales exceed expected values.

METHODS

To achieve the objectives of this study, provincial data on cigarette sales, prices and GDP per capita were used. These data were modeled with machine learning techniques that are widely used to detect anomalies in other areas.

RESULTS

The magnitude of the average anomaly in provinces where sales are higher than their expected values exceeds 40%, while the average anomaly in provinces where sales are lower than their expected values (as detected by the EPSs) is <15%. Furthermore, the results reveal that there is a clear geographical pattern to the provinces in which sales below reasonable values are observed. In addition, the values provided by the EPSs in Spain, as indicated in the previous literature, are slightly overestimated. Finally, some regions bordering other countries or that are highly influenced by tourism have observed sales that are higher than their expected values.

CONCLUSIONS

Cooperation between countries in their tobacco control policies can have better effects than policies developed based on information from a single country. The lack of control over the transactions of tourists and the inhabitants of bordering countries can cause important anomalies that distort the understanding of tobacco consumption that governments have based on official data.