Generating Revenue & Cutting Costs The Health & Economic Benefits of Tobacco Control Frank J. Chaloupka, University of Illinois at Chicago Ministerial Leadership in Health Harvard University, 19 April 2016 1
www.tobacconomics.org
Health & Economic Consequences of Tobacco Use
Leading Causes of Death Globally Source: World Economic Forum & Harvard School of Public Health, 2011 Other Conditions include communicable diseases, maternal/perinatal conditions, and nutritional deficiencies
NCD Risks @tobacconomics Source: WHO, 2014
NCDs: Major Risk Factors Major NCD Heart Disease & Stroke Major modifiable causative Risk Factors Tobacco Use Unhealthy Diet Physical Inactivity Harmful Use of Alcohol Diabetes Cancer Chronic Lung Disease Source: WHO, 2010; Mackay, 2012
Prevalence of Current Tobacco Smoking, 2013 35% 34.1% 32.7% 30% 29.7% 28.8% 26.3% Percent Current Tobacco Smokers 25% 20% 15% 10% 19.1% 8.9% 12.4% 17.6% 16.3% 18.8% 14.1% 17.5% 10.3% 5% 4.8% 4.7% 6.3% 6.2% 6.4% 6.1% 3.1% 0% 0.5% 0.5% Burkina Faso Ethiopia Ghana Jamaica Malawi Mozambique Sri Lanka Uganda 0.4% Male Female Total www.tobacconomics.org Source: WHO 2015
Economic Consequences of NCDs Large economic burden from NCDs: Considerable, growing health care costs from treating NCDs Significant lost productivity Cause of poverty Account for much of socioeconomic inequalities in health @tobacconomics
Smoking-Attributable Spending as Share of Total Health Expenditures, 2012, by Income Group and WHO Region Source: Goodchild, et al., forthcoming
Economic Costs of Smoking-Attributable Diseases as Share of GDP, 2012, by Income Group and WHO Region Source: Goodchild, et al., forthcoming
Tobacco Control Evidence-based interventions that address demand for and supply of tobacco MPOWER most effective and costeffective strategies: Monitor Protect Offer Warn Enforce Raise @tobacconomics 11
Key Tobacco Control Policies Cost-Effectiveness $6,000 $5,000 Cost per DALY Averted $4,000 $3,000 $2,000 $1,000 $0 Increased taxation Comprehensive advertising ban Clean indoor air laws Information and labelling Nicotine Replacement therapy High Income Upper Middle Income Lower Middle Income Low Income Source: WHO, unpublished data
Tobacco Taxation
Tobacco Taxation We [] have a package of six policy measures, known as MPOWER, that can help countries implement the provisions in the Convention. All six measures have a proven ability to reduce tobacco use in any resource setting. But tobacco taxes are by far the most effective. Director General Dr. Margaret Chan, WHO www.tobacconomics.org
Tobacco Taxes & Tobacco Use Increases in tobacco excise taxes that increase prices result in a decline in overall tobacco use. @tobacconomics
27,000 Cigarette Price & Consumption Hungary, 1990-2011, Inflation Adjusted 700 25,000 600 23,000 500 Million Sticks 21,000 19,000 400 300 Price, 2011 Forints/Pack 17,000 200 15,000 100 13,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Consumption, Million Sticks Price, 2011 Forints Linear (Consumption, Million Sticks) Linear (Price, 2011 Forints) www.tobacconomics.org Sources: EIU, ERC, and World Bank
Tobacco Taxes and LMICs The demand for tobacco products in lower-income countries is at least as responsive to price as is the demand for tobacco products in high-income countries. @tobacconomics
Tobacco Taxes and Prevalence of Tobacco Use Increases in tobacco excise taxes that increase prices reduce the prevalence of adult tobacco use. @tobacconomics
Adult Prevalence & Price, Brazil 16 Adult Smoking Prevalence and Cigarette Price Brazil, Inflation Adjusted, 2006-2013 16 5.4 15 Adult Smoking Prevaleence 15 14 14 13 13 12 4.9 4.4 3.9 Price per Pack, 2013 BRL 12 11 2006 2007 2008 2009 2010 2011 2012 2013 3.4 Sales, Million Sticks Price per Pack, 2013 BRL Sources: Ministry of Health, Brazil; EIU; World Bank
Tobacco Taxes and Cessation Increases in tobacco excise taxes that increase prices induce current tobacco users to quit. www.tobacconomics.org
Taxes, Prices & Smoking Cessation 200,000 Monthly Quit Line Calls, United States 11/04-11/09 4/1/09 Federal Tax Increase 150,000 1/1/08 WI Tax Increase 100,000 50,000 0 2004 2005 2005 2005 2006 2006 2006 2007 2007 2007 2008 2008 2008 2009 2009 2009 @tobacconomics
70 Cigarette Prices and Cessation US States & DC, 2009 % Ever Smokers Who Have Quit 65 60 55 50 y = 0.0283x + 43.083 R² = 0.37104 45 350 400 450 500 550 600 650 700 750 800 850 Average price (in cents) Source: BRFSS, Tax Burden on Tobacco, 2010, and author s calculations
Tobacco Taxes and Youth Tobacco Use Increases in tobacco excise taxes that increase prices reduce the initiation and uptake of tobacco use among young people, with a greater impact on the transition to regular use. www.tobacconomics.org
Tobacco Taxes and Youth Tobacco Use Tobacco use among young people responds more to changes in tobacco product taxes and prices than does tobacco use among adults.
Cigarette Price and Youth Smoking Prevalence United States, 1991-2011 36 $5.50 31 Price per pack (8/11 dollars) $4.75 $4.00 26 21 16 Smoking Prevalence $3.25 11 $2.50 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Year Cigarette Price 12th grade prevalence 10th grade prevalence 8th grade prevalence 6 Source: MTF, Tax Burden on Tobacco, 2011, and author s calculations 25
Tobacco Taxes and Low- Income Populations In many countries, tobacco use among lower-income populations is more responsive to tax and price increases than is tobacco use among higherincome populations. @tobacconomics
Who Pays& Who Benefits Turkey, 25% Tax Increase 9% 8.5% 9.7% 4% -1% -6% -2.2% -11% -16% -21% -20.4% -18.5% -26% -31% -36% -35.3% Change in Consumption Change in Taxes Paid Source: Adapted from Önder & Yürekli, 2014
Tobacco Taxes & Affordability To achieve public health goals, tobacco tax and price increases need to reduce the affordability of tobacco products. @tobacconomics
Affordability and Tobacco Use Bangladesh, 1997-2010 A f f o r d a b i l i t y ( 1 9 9 7 = 1 ) 1.1 1 0.9 0.8 0.7 445 425 405 385 365 P e r C a p i t a C o n s u m p t i o n 0.6 1997 1999 2001 2003 2005 2007 2009 345 Affordability Per Capita Consumption Source: Euromonitor, 2011
Cigarette Affordability, 2014 and Change, 2008-2014 Uganda Sri Lanka Mozambique Jamaica Guyana Guinea Bissau Ghana Gabon Ethiopia Côte d'ivoire Burkina Faso Bahamas 0% 2% 4% 6% 8% 10% 12% 14% 16% % of per capita GDP to buy 100 packs of most popular brand www.tobacconomics.org Source: WHO 2015
Tobacco Taxes and Population Health Tobacco tax increases that increase prices improve population health @tobacconomics
France: smoking, tax and male lung cancer, 1980-2010 6.0 # cigarettes/adult/day Number/adult/day and death rates 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 Lung cancer death rates per 100,000 (divided by four): men age 35-44 Relative price 300 250 200 150 100 Price (% relative to 1980) 1.0 1980 1985 1990 1995 2000 2005 2010 50 Year @tobacconomics Source: Jha, in progress
Tobacco Tax Structure Higher and more uniform specific tobacco excise taxes result in higher tobacco product prices and increase the effectiveness of taxation policies in reducing tobacco use. www.tobacconomics.org
Excise tax structure: Specific and mixed relying more on the specific component tend to lead to higher prices Source: WHO, 2015
Types of Cigarette Excise Taxes, 2014 Source: WHO 2015
Summary of Tax Structures Specific Uniform Price Excise Share Total Tax Share Bahamas Ad Valorem Tiered $9.41 42.9% 42.9% Burkina Faso Ad Valorem Tiered $2.21 17.0% 32.2% Côte d'ivoire Ad Valorem Uniform $2.17 15.2% 26.1% Ethiopia Ad Valorem Uniform $1.91 13.9% 18.8% Gabon Ad Valorem Uniform $3.21 19.6% 34.8% Ghana Ad Valorem --- $2.29 13.2% 28.3% Guinea Bissau Ad Valorem Uniform $1.40 3.3% 19.1% Guyana Specific Uniform $3.11 11.4% 25.2% Jamaica Specific Uniform $13.00 26.3% 42.9% Malawi Specific Tiered $7.43 14.5% 20.7% Mozambique Mixed/Specific Tiered $1.76 16.3% 30.9% Sri Lanka Specific Tiered $9.24 63.1% 73.8% @tobacconomics 36
Tobacco Tax Levels WHO Best Practice : set tobacco excise tax levels so that they account for at least 70 percent of the retail prices for tobacco products Update of World Bank yardstick of any taxes accounting for 2/3 to 4/5 of retail prices Well above where most countries are currently Further increases in countries that do reach this target www.tobacconomics.org
Weighted average Price of the Most Sold Brand & Taxes per Pack By Income Group 2012 Source: WHO 2015
Cigarette Taxes & Prices, 2014 14 80.00% 12 73.8% 70.00% Tax/Price per Pack, Most Popular Brand, PPP 10 8 6 4 42.9% 32.2% 26.1% 18.8% 34.8% 28.3% 19.1% 25.2% 42.9% 20.7% 30.9% 45.1% 60.00% 50.00% 40.00% 30.00% 20.00% Total Tax Share of Price 2 10.00% 0 0.00% Net-of-Tax Price Specific Tax Ad Valorem Tax Other Taxes Total Tax Share @tobacconomics
Tobacco Taxes and Tobacco Tax Revenues Tobacco tax increases increase tobacco tax revenues. www.tobacconomics.org
South Africa - Taxes, Prices, and Tax Revenues, 25 1970-2012, Inflation Adjusted 9000 20 8000 7000 Rand per Pack 15 10 6000 5000 4000 3000 Tax Revenues, Million Rand 5 2000 1000 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 0 Industry Price Excise Tax VAT Excise Tax Revenues
Earmarking Tobacco Tax Revenues Using a portion of tobacco tax revenues to support other tobacco control and/or health promotion efforts Increases the health impact of tobacco tax increases Increases public support for tax increases Including among many smokers
State Tobacco Control Program Funding and Youth Smoking Prevalence, United States, 1991-2009 37 $1,000 35 Total Funding $Millions (FY10 dollars) $800 $600 $400 $200 33 31 29 27 25 23 21 Percent Current Smoking $0 1991 1994 1997 2000 2003 2006 2009 Year 19 total state program funding high school prevalence www.tobacconomics.org Source: ImpacTeen Project, UIC; YRBS
Support for Earmarked Taxes www.tobacconomics.org Source: WHO 2015
Earmarked Tobacco Taxes 45
Earmarked Tobacco Taxes 46
Tax Avoidance & Tax Evasion Tax avoidance and tax evasion reduce, but do not eliminate, the public health and revenue impact of tobacco tax increases. www.tobacconomics.org
Combating Illicit Tobacco Trade Illicit trade protocol to the WHO FCTC Currently in process of being signed/ratified: Gabon, Sri Lanka have ratified; Burkina Faso, Côte d Ivoire, Ghana and Guinea Bissau have signed Provisions calling for: Strong tax administration Prominent, high-tech tax stamps and other pack markings Licensing of manufacturers, exporters, distributors, retailers Unique identification codes on packages Better enforcement Increased resources; Focus on large scale smuggling Swift, severe penalties Multilateral/intersectoral cooperation @tobacconomics
Summary
Summary Considerable health and economic consequences from tobacco use Tobacco control has positive economic impact Healthier, more productive labor force, reduced costs Tobacco control interventions are cost-effective Sizable tobacco tax increases most effective and cost-effective option for reducing tobacco use and its consequences Improve public health while raising revenues www.tobacconomics.org
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