2011 Johns Hopkins Bloomberg School of Public Health Best Practices in Tobacco Taxation Frank J....
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Transcript of 2011 Johns Hopkins Bloomberg School of Public Health Best Practices in Tobacco Taxation Frank J....
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices in Tobacco TaxationBest Practices in Tobacco Taxation
Frank J. Chaloupka, PhDUniversity of Illinois at ChicagoInternational Tobacco Evidence Network
2011 Johns Hopkins Bloomberg School of Public Health
Overview
Tobacco tax structure
Tobacco tax levels and tax increases
Tobacco tax administration
Economic impact of tax increases—myths and facts
2
Image source: World Health Organization. (2010).
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Why Tax Tobacco?
Use tobacco excise tax increases to achieve the public health goal of reducing the death and disease caused by tobacco use As called for
in Article 6 of the FCTC
Additional benefitof generating significant increases intobacco tax revenues in short- to medium-term
3
Source: Jha, P. (2009).
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: What Type of Tax Structure?
Simpler tax structure is better Complex tax
structures are more difficult to administer
Complex tax structures create more opportunities for tax evasion and tax avoidance
Where existing tax structure is more complex, aim to simplify over time with goal of achieving a single uniform tax
4
Differential/tiered excise taxes on cigarettes
Number of countries
Total covered 156
With tiers 32
Base of tiers Retail price Producer price Sales volume Production volume Type—filter/non-filter Type—hand-/machine-made Type—kretek/white cigarette Packaging—soft/hard Cigarette length Trade—domestic/imported Weight (tobacco content in cigarette) Leaf content—domestic/imported
11211
122134113
Of the 155 countries with available data in TMA, 10 countries have no excise. Some countries differentiate based on more than one criterion. Eight countries differentiate their excises by more than one criterion.
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: What Type of Tax?
Rely more on specific tobacco excises as the share of total excises in price increases Greater public health
impact of specific excises given reduced opportunities for switching down in response to tax and price increases
Uniform specific tax sends clear message that all brands are equally harmful
Where existing tax is ad valorem, adopt a specific tax and increase reliance on specific tax over time
55
Source: WHO calculations using WHO GTCR 2009 data.
Number of countries
Total covered 182
Specific excise only 55
Ad velorem excise only
60
Mixture of both excises
48
No excise 19
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Taxes on Different Products
Adopt comparable taxes and tax increases on all tobacco products Maximizes the public health
impact of tobacco taxes and tax increases by minimizing opportunities for substitution between tobacco products in response to changes in relative prices
Challenging where diverse products available
6
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Adjust Taxes for Inflation
Automatically adjust specific taxes for inflation Unless adjusted
regularly, real value of tax fallsover time, as do the revenues generated by the tax
Ensures that the publichealth impact of the tax is maintained
Currently done in Australia, New Zealand
7
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Use Taxes to Reduce Affordability
Increase tobacco taxes by enough to reduce the affordability of tobacco products Positive
relationship between income and tobacco use implies increases in income can increase tobaccouse even as taxes rise
8
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Increase taxes
Set tobacco excise tax levels so that they account for at least 70% of the retail prices of tobacco products Update of the
World Bank’s 2/3-4/5 yardstick
Well above where most countries are currently
Further increase in countries that have reached target
9
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Tax Administration
Eliminate tax or duty-free sales of tobacco products As called for in Article 6 of FCTC Reduces opportunities for
individual tax avoidance Maximizes the public health
and revenue impact of taxes
Adopt new technologies to strengthen tobacco tax administration and minimize tax avoidance and evasion Apply new, sophisticated tax stamps (banderoles) Adopt tracking and tracing technology Adopt production monitoring technologies
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2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Tax Administration
Strengthen tax administrators’ capacity by licensing all involved in tobacco product manufacturing, distribution, and sales Facilitates identification of those engaged in illicit trade Enhances ability to penalize those engaged in illicit
trade through suspension or revocation of license
Ensure certain, swift, and severe penalties for those caught engaging in illicit trade in tobacco products Increases the expected costs of engaging in illicit trade Strong, administrative sanctions coupled with licensing
and tracking/tracing systems
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2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Tax Administration
Strengthen tax administrators’ capacity to monitor tobacco product markets and evaluate the impact of tobacco tax increases “Trust but verify” Monitoring of tobacco production and distribution Physical controls over tobacco products Periodic audits Capacity to estimate the impact of tobacco tax changes
on tobacco product consumption and revenues
12
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Earmarking
Earmark a portion of tobacco tax revenues for tobacco control and health promotion efforts Adds to the
public healthimpact of tobacco taxes by further reducing tobacco use
Increases public support for higher tobacco taxes
13
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Economic Impact—Myths and Facts
Do not allow concerns about job losses to prevent tobacco tax increases Tobacco employment often declining even where
tobacco product consumption is rising Tax-induced reductions in tobacco-dependent
employment are offset by increases in other sectors Where concerns are significant, use tax revenues to
support the transition from tobacco farming and manufacturing to alternative livelihoods
14
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Economic Impact—Myths and Facts
Do not allow concerns about the inflation impact of higher tobacco taxes to deter tax increase Tobacco tax increases have minimal impact on inflation
in most countries If concerns about inflationary impact on pension and
other payments tied to consumer price index, use a price index that excludes tobacco products
15
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Economic Impact—Myths and Facts
Do not view low taxes and prices for some tobacco products as a “Pro Poor” policy High tobacco taxes on all tobacco products will result in
greater reductions in tobacco use among the poor Resulting reductions in use lead to a progressive
distribution of the health and economic benefits that result from tax increase—truly a “Pro Poor” policy
16
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices: Economic Impact—Myths and Facts
Do not allow concerns about the regressivity of higher tobacco taxes to prevent tax increases Regressive impact often overstated In many countries, tax increase can reduce regressivity
given greater reductions in use among the poor Concerns about the impact on the poor can be offset by
using some of the new revenues to support efforts to help poor users quit, health promotion efforts targeting the poor, and/or poverty alleviation programs
17
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices in Tobacco Taxation
A simpler tobacco tax structure that taxes all tobacco products equivalently and relies more on specific taxes will have a greater impact in reducing tobacco use and its consequences
Effective tobacco tax administration includes regularly increasing taxes with inflation and income growth so as to reduce the affordability of tobacco products
18
2011 Johns Hopkins Bloomberg School of Public Health
Best Practices in Tobacco Taxation
Strong tobacco tax administration is effective in reducing tax avoidance and tax evasion
Governments should not be deterred from raising tobacco taxes by the misleading arguments used in opposition to tax increases
Raise tobacco excise taxes so that they account for 70% of the retail prices of tobacco products
19