Questioning the regressivity of tobacco taxes: a distributional accounting impact model of increased tobacco taxation

On the impacts of higher tobacco taxes in Argentina: a computable general equilibrium approach

OBJECTIVES

We analyse the employment effects of increasing tobacco taxation in Argentina by building a computable general equilibrium (CGE) model.

METHODS

In line with recent changes in tobacco taxation in the country, the CGE model simulates an increase in excise tax on cigarettes.

RESULTS

The results show that even a substantial increase in tobacco taxation induces a zero-net change in overall employment in the economy when the newly raised tax revenues are spent by the government on education, health or public infrastructure. Increased tobacco taxes may shift jobs from tobacco-related sectors to other sectors of the economy, but the overall impact on the total number of jobs is negligible.

CONCLUSIONS

The widely documented positive effects of higher tobacco taxes (including a healthier population, more productive workers, savings from avoided costs of medical treatment for tobacco-related diseases, reductions in the number of new young smokers, among others) would far outweigh the nearly null effect of higher taxes on total net employment.

Patterns and determinants of tobacco purchase behaviors among male cigarette smokers in Vietnam: A latent class analysis

INTRODUCTION

Understanding smokers' purchasing patterns can aid in customizing tobacco control initiatives aimed at reducing the tobacco smoking prevalence. Therefore, this study identified cigarette purchase behavior among Vietnamese male smokers and associated demographic and consumption factors.

METHODS

We analyzed a secondary dataset of male current tobacco smokers (n=3983) who participated in the Vietnam Global Adult Tobacco Survey in 2015. We applied the latent class analysis (LCA) to identify the classes of purchase behavior among cigarette smokers (n=1241). Multinomial logistic regression was performed to identify demographics (education level, ethnicity, partnership status, and household socioeconomic status) and cigarette consumption variables (smoking years and heavy smoking status) related to purchase behavior classes. The results are reported as an adjusted relative risk ratio (ARRR).

RESULTS

The LCA identified four cigarette purchase behaviors classes: Class 1 (price-insensitive and purchased international brand: 44.4%), Class 2 (price-sensitive and purchased domestic brand: 27.6%), Class 3 (price-sensitive and purchased cigarettes in a street vendor: 18.6%), and Class 4: price-sensitive and purchased loose/carton cigarette: 9.4%). The poorer economic groups were more likely to belong to the three price-sensitive classes. Heavy smokers and those who had smoked for a longer period were more likely to belong to Class 3 (ARRR=2.33; 95% CI: 1.51-3.58 and ARRR=1.02; 95% CI: 1.001-1.05, respectively) and Class 4 (ARRR=2.94; 95% CI: 1.71-5.06 and ARRR=1.05; 95% CI: 1.02-1.08, respectively).

CONCLUSIONS

Varied purchasing behaviors among male cigarette smokers, influenced by divergent price sensitivities and economic backgrounds, underscore the need for comprehensive tobacco control. Future efforts should include targeted policy interventions, behavior modification, and reshaping social norms.

Making smoking history: temporal changes in support for a future smoking ban and increasing taxes in the general population of Denmark

BACKGROUND

An end date for smoking has been adopted in several countries and is now being discussed by governments all over the world. However, little is known about temporal changes in citizens' support for a future smoking ban.

AIM

To examine temporal changes in support for a future smoking ban and for increasing taxes on tobacco in Denmark, and to explore whether these changes differ across sex, age, educational attainment, smoking status and between smokers with/without intention to quit.

METHOD

The study was based on two waves of 'The Danish Capital Region Health Survey' conducted in 2013 and 2017. The pooled study sample included 96 521 citizens aged ≥16 years old.

RESULTS

Public support for a future smoking ban increased from 30.6% in 2013 to 50.3% in 2017, whereas support for increasing tobacco taxes remained unchanged at 59%. Support for a future smoking ban increased significantly in almost all subgroups from 2013 to 2017: Support among daily smokers increased by 27% between 2013 and 2017. Support among never smokers was almost 2.63 times higher than among smokers in 2013 and increased further in 2017 (OR: 2013=2.63; 2017=5.13).

CONCLUSION

This study indicates a readiness to support a future smoking ban and increasing tobacco taxes. Support for a future smoking ban has increased from 2013 to 2017 among both young people and adults. By 2017, about half of the population supported a future smoking ban and increasing tobacco taxes. Findings may help inform policy-making related to endgame strategies.

Linking health and finance ministries to improve taxes on unhealthy products

The World Health Organization recommends economic measures such as taxes on tobacco, alcohol and unhealthy foods and beverages as part of a comprehensive strategy for prevention of noncommunicable diseases. However, progress in adopting these so-called health taxes has been hampered, in part, by different approaches and perceptions of key issues in different sectors of government. Health promotion is the responsibility of health policy-makers, while taxation is the mandate of finance ministries. Thus, strengthening cooperation between health and finance policy-makers is central to the successful adoption and implementation of effective health taxes. In this paper we identify the shared concerns of finance and health policy-makers about health taxes with the aim of enabling more effective cross-sector cooperation towards both additional financing for health systems and changes in unhealthy behaviours. For example, new approaches to supporting health taxation include the growing priority for health-system financing due to the growing burden of noncommunicable diseases, and the need to address the health and economic damage due to the coronavirus disease 2019 pandemic. As a result, high-level efforts to achieve progress on health taxes are gaining momentum and represent important progress towards using the combined expertise of health and finance policy-makers.

Differential price responses for tobacco consumption: implications for tax incidence

Increasing tobacco taxes is considered the most effective an cost-effective policy to reduce tobacco consumption. However, a common objection to tobacco taxes is that they tend to rely disproportionately on the poorest individuals since less affluent smokers incur proportionately greater expenditures on cigarettes compared with more affluent smokers. Such objections usually assume that all smokers throughout the income distribution react similarly to an increase in tobacco prices. But, if less affluent smokers are more sensitive to price changes (ie, they have a higher demand price elasticity), reductions in tobacco consumption should be higher at the bottom of the income distribution. This paper uses data from Argentina's Household Expenditure Survey to estimate demand price elasticities for tobacco by income and age groups. Results indicate that less affluent smokers present higher demand price elasticities for cigarettes than more affluent ones. A 10% increase in cigarette prices would decrease consumption by 8.5% (4.4%) for the poorest (richest) smokers. In addition, young people are the most elastic group. These differential elasticities have relevant implications in terms of the distributional incidence of increasing tobacco taxes. As less well-off individuals reduce consumption relatively more, they bear a relatively lower tax burden. Thus, tobacco tax increases may not be regressive as is often believed. As a whole, this paper provides policymakers with relevant arguments for policy discussion and the public debate on common objections to increasing tobacco taxes.

Do Budget Cigarettes Emit More Particles? An Aerosol Spectrometric Comparison of Particulate Matter Concentrations between Private-Label Cigarettes and More Expensive Brand-Name Cigarettes

Private-label cigarettes are cigarettes that belong to the retailer itself. Private-label cigarettes from discounters or supermarkets are cheaper than brand-name cigarettes, and their lower price has allowed them to garner an ever-increasing share of the tobacco product market, especially among lower socioeconomic groups. Particulate matter (PM), a considerable component of air pollution, is a substantial health-damaging factor. Smoking is the primary source of PM in smokers’ homes. In a 2.88 m3 measuring chamber, the PM emission fractions PM10, PM2.5, and PM1 from three private-label cigarette brands and three brand-name cigarette brands with identical nicotine, tar, and carbon monoxide content were measured and compared to those of a reference cigarette by laser aerosol spectroscopy. All cigarette brands emitted PM in health-threatening quantities. The measurement results ranged from 1394 µg/m3 to 1686 µg/m3 PM10, 1392 µg/m3 to 1682 µg/m3 PM2.5, and 1355 µg/m3 to 1634 µg/m3 PM1, respectively. Only one private-label brand differed significantly (p < 0.001) from the other cigarette brands, which were tested with slightly lower PM levels. All other brands differed only marginally (not significant, p > 0.05) from one another. Significant (p < 0.05) negative correlations between private-label and brand-name cigarettes were found for PM10, PM2.5, and PM1 when accounting for tobacco filling densities, and for PM1 when accounting for filter lengths. The especially health-hazardous fraction PM1 accounted for the largest proportion of PM emissions from the cigarettes tested. The results of this study suggest that- cheaper tobacco products are as harmful as more expensive ones, at least regarding PM emissions. This highlights the importance of anti-smoking campaigns, especially for lower socioeconomic groups, where smoking is more widespread. Governments should reduce the price gap between cheap and more expensive tobacco products by implementing specific tobacco taxes. In such a case, at increasing prices of tobacco products, a downward shift to private-label cigarettes would probably decrease.

The potential distributional health and financial benefits of increased tobacco taxes in Ethiopia: Findings from a modeling study

Ethiopia raised taxes on tobacco products in early 2020, increasing the overall price of the typical pack of cigarettes by about 67%. We quantify the potential impacts of Ethiopia's tobacco tax hike on various outcomes—life years, tax revenues, cigarette expenditures and catastrophic health expenditures (CHE). Using parameters like price elasticity of demand for cigarettes and smoking prevalence in Ethiopia from the existing literature and secondary data sources, we model the potential implications of the reform at the population level and for different wealth quintiles. We focus only on men since a small proportion of Ethiopian women smoke. Results indicate that Ethiopia's tax hike could induce a significant proportion of current smokers to quit smoking and thereby save almost eight million years of life in the current population. The reform is also likely to increase tax revenues by USD26 million in the first year after its introduction. The richest quintile will bear the greatest share of this higher tax burden and the poorest will bear the least. Additionally, deaths due to the main diseases associated with smoking will fall. This is expected to avert up to 173,000 CHE cases due to the out-of-pocket costs that would have been incurred in obtaining medical treatment. This analysis highlights that cigarette tax hikes in countries that have low smoking prevalence can reduce smoking even further, and thereby protect against the future health and financial costs of smoking. Importantly, the effects of these policies can be progressive across the income spectrum.

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We model the potential impacts of a recent tobacco tax increase in Ethiopia.

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Results show that the reform could save eight million years of life.

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Government tax revenue will likely go up by $26 million in the first year.

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Up to 173,000 fewer cases of catastrophic health expenditures could occur.

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All these effects are expected to disproportionately benefit the poorest.

A Study on China's Tobacco Taxation and Its Influencing Factor on Economic Growth

Tobacco is a significant product providing considerable economic benefits to countries worldwide, while its increased consumption causes health and socio-economic losses for smokers and non-smokers. This paper constructs a decomposition system of tobacco taxation: the population aging factor is included in the influencing factors of personal tax, and personal tax revenue is regarded as the product of tax structure, macro tax burden, regional economy, reciprocal aging, and the elderly population. This article conducts an empirical study on the relationship between taxation and economic growth. The estimated coefficients of business tax and corporate income tax are significant at the significance level of 0.1, with a consumption tax and time-variable coefficients reporting a 0.02 level of significance. The T statistic value and the explanatory degree of the variables involved in the model to the explained variables are also very high, reaching more than 95%. We find that increasing the macro tax burden negatively impacts economic growth. Therefore, the study suggests that for fostering the industry’s economic growth, the country needs to ensure the optimal macro tax burden of 17.5%, with different types of taxes influencing economic growth. Personal tax reform should pay attention to the phenomenon of aging, adjust the tax structure to increase personal tax income, provide policy support and guarantee for the elderly labor force, and encourage the re-employment of silver-haired people to alleviate the adverse impact of aging on taxation.

Effectiveness of tax policy changes in Montenegro: smoking behaviour by socio-economic status

Background

The main goal of this study was to examine the responsiveness of smoking prevalence and cigarette consumption to price and income changes by income groups and the effectiveness of tax policy changes to reduce cigarette consumption in Montenegro.

Data and methods

A two-part model was applied to estimate smoking participation, smoking intensity price and income elasticity. The first part of the model applies logit regression, while the second uses Deaton’s model to improve the validity and objectivity of conditional (smoking intensity) elasticity results. A generalised linear model (GLM) was applied to verify robustness. The reason for this is that Deaton’s model is commonly used in the analysis of Household Budget Survey (HBS) data, especially when households do not report the market price. Moreover, using this model, it is possible to capture the shading of quality to price change. The analysis used HBS data (2006–2017).

Results

The estimates indicate that tobacco pricing policies had a much higher impact on smoking prevalence in the low-income group (price elasticity of −0.595) relative to the high-income group (price elasticity of −0.344). The same conclusion could be drawn for the smoking intensity elasticity: the high-income group was the least affected by changes in price (price elasticity of −0.258). At the same time, the most affected was the low-income group, with price elasticity of −0.424. Poorer households spent a larger share of their budget on cigarettes. The simulation results confirm that increases in the specific excise taxes of 58.3% on tobacco would reduce total cigarette consumption by 11.25% while increasing the collection of government revenue by 8.07%.

Conclusion

Smoking prevalence and consumption are very responsive to price and income changes, with considerable differences in elasticities between income groups. The taxation policy has a positive impact on changing patterns of consumption and public revenues across each income group. Low-income and middle-income households would benefit the most, while on the other hand, the highest revenue collection was generated from the wealthiest group. Our results align with results obtained so far for other low-income and middle-income countries. This paper contributes to the analysis of the smoking prevalence and cigarette consumption responsiveness to price and income changes, which was conducted for the first time in Montenegro.

Addressing lower-priced cigarette products through three-pronged comprehensive regulation on excise taxes, minimum price policies and restrictions on price promotions

The prices that smokers pay out-of-pocket for their tobacco products ultimately influence their smoking behaviour. Although cigarette excise taxes are arguably the best and most used policy to increase cigarette prices, taxes are only one component of retail cigarette prices. The persistence of lower-priced products, disproportionately purchased by lower-income smokers, in jurisdictions with high excise taxes is an Achilles heel for tobacco tax policy. When governments raise excise taxes, the tobacco industry responds. The industry reduces tax pass-through to minimise the price increases for lower-priced brands and offers price discounts to retailers and coupons to consumers. In addition, smokers who do not quit after tax increases may downshift brands, purchase in bulk or substitute lower-priced tobacco product types. This may be particularly true for price-sensitive smokers, including those with lower incomes. We propose that raising excise taxes will be more effective in reducing the persistence of lower-priced products and income-based smoking disparities when taxes are designed to raise prices frequently and substantially for all products and are combined with (a) minimum price laws and (b) bans on coupons, discounts and other promotions. In combination, these three complementary policies restrict the tobacco industry's ability to undermine the impact of higher excise taxes upon consumer prices. Very few jurisdictions have implemented comprehensive three-pronged tobacco price regulation, but doing so would likely address many of the limitations that come with a sole focus on raising excise taxes.

Equity impact of minimum unit pricing of alcohol on household health and finances among rich and poor drinkers in South Africa

Introduction

South Africa experiences significant levels of alcohol-related harm. Recent research suggests minimum unit pricing (MUP) for alcohol would be an effective policy, but high levels of income inequality raise concerns about equity impacts. This paper quantifies the equity impact of MUP on household health and finances in rich and poor drinkers in South Africa.

Methods

We draw from extended cost-effectiveness analysis (ECEA) methods and an epidemiological policy appraisal model of MUP for South Africa to simulate the equity impact of a ZAR 10 MUP over a 20-year time horizon. We estimate the impact across wealth quintiles on: (i) alcohol consumption and expenditures; (ii) mortality; (iii) government healthcare cost savings; (iv) reductions in cases of catastrophic health expenditures (CHE) and household savings linked to reduced health-related workplace absence.

Results

We estimate MUP would reduce consumption more among the poorest than the richest drinkers. Expenditure would increase by ZAR 353 000 million (1 US$=13.2 ZAR), the poorest contributing 13% and the richest 28% of the increase, although this remains regressive compared with mean income. Of the 22 600 deaths averted, 56% accrue to the bottom two quintiles; government healthcare cost savings would be substantial (ZAR 3.9 billion). Cases of CHE averted would be 564 700, 46% among the poorest two quintiles. Indirect cost savings amount to ZAR 51.1 billion.

Conclusions

A MUP policy in South Africa has the potential to reduce harm and health inequality. Fiscal policies for population health require structured policy appraisal, accounting for the totality of effects using mathematical models in association with ECEA methodology.

Distributional health and financial consequences of increased cigarette tax in Iran: extended cost-effectiveness analysis

BACKGROUND

To assess the potential impact of a tax-induced cigarette price increase on financial and health outcomes by different socioeconomic groups.

METHODS

In a modeled condition using pooled cross-section data from Household Income and Expenditure Survey (2002-2017) and Iran 2019 population data, a methodology of an extended cost effectiveness analysis (ECEA) was applied to model the impact on cigarette consumption of hypothetically increased cigarette tax. The methodology was employed to evaluate: [1] health benefits (premature deaths averted); [2] health expenditures regarding smoking-related disease treatment averted; [3] additional tax revenues raised; [4] change in household expenditures on cigarettes; and [5] financial risk protection among male Iranian smokers in a time span of 60 years following a one-time increase in cigarette price of 75%. The Stata version 15.1 (StataCorp., College Station, TX, USA) was used to perform the relevant analysis and estimate regression models.

RESULTS

A 75% increase in cigarettes price through taxation would reduce the number of smokers by more than half a million, 11% of them in the poorest quintile; save about 1.9 million years of life (11% of which would be gained in the lowest quintile compared to 20% in the highest one); eliminate a total of US$196.4 million of health expenditures (9% of which would benefit the bottom quintile). Such a policy could raise the additional annual tax revenues by roughly US$ 1 billion, where the top two quintiles bear around 46% of the total tax burden. We estimated that the tax increase would avert an estimated 56,287 cases of catastrophic expenditure that wholly concentrated among the bottom two expenditure quintiles.

CONCLUSION

Increasing cigarette tax can provide health and financial benefits, and would be pro-poor in terms of health gains, Out-of-Pocket (OOP) savings, and financial risk protection against smoking-related diseases.