Tobacco tax yardstick : does it work?
Abstract
Tobacco tax yardstick is the recommendation to have tax component between two-thirds and four-fifths of the total retail cost. Since 1990s, Denmark, Finland, France, Ireland, Portugal and the UK had levied cigarette taxes higher than 75% of retail price. The paper explores effectiveness of tobacco taxation policy in terms of tobacco consumption reduction in these countries in 1990-2010. Design Data on tobacco sales, tax rates and prices were taken from the EU and national databases. Trends of total tobacco consumption were estimated including both legal and illegal (smuggling into and out of the country) cigarette and other tobacco products sales. Results In the considered countries, four kinds of tobacco taxation policy were practiced: 1) Tax decrease followed by tobacco consumption increase while tax proportion in retail price was about 75%; 2) No decline in tobacco consumption when taxes were stable, while the tax proportion exceeded 75%; 3) After steep tax increase tobacco consumption was sharply reduced, while there were almost no changes in the tax proportion; 4) Moderate tax increases reduced tobacco consumption only if they increased real prices, adjusted for inflation, income and illicit tobacco share, while tax proportion in the increased real price could even decline. Conclusion Keeping tobacco tax component high (even above 75% of retail price) did not contribute to the health objectives aimed at reducing tobacco consumption if real prices were not increased. To reduce tobacco consumption, even very high tobacco tax should be on the rise to ensure tobacco affordability decrease.
Description
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Journal Article (peer-reviewed)
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Text
Keywords
TAXATION, ECONOMICS, PRICE, SURVEILLANCE AND MONITORING, ILLEGAL TOBACCO PRODUCTS, TOBACCO CONTROL, PUBLIC HEALTH, HEALTH POLICY
Citation
Krasovsky, K. (2013). Tobacco tax yardstick: does it work?. Tobacco Control