Countries making progress on "sin taxes"?
A new WHO paper is out, reviewing tobacco tax reform in 15 countries:
Fifteen years of tobacco tax reform show countries can make harmful products less affordable
The basic idea is: higher prices are generally the most straightforward deterrent to smoking, and so governments should tax cigarettes appropriately if it wants to reduce smoking.
Some key points from the WHO review:
Overall point: bold, regular tax increases on harmful products directly reduce consumption and save lives; while small, irregular taxes are easily eroded by inflation.
The Philippines Success Story: Following major reforms in 2013, cigarette prices in the Philippines rose 638%, smoking prevalence dropped by roughly one-third, and the tax revenue was used to fund universal health coverage.
Not as rosey elsewhere: In several countries though, prices and taxes remained stagnant.
Sugary Drinks and Alcohol are Untapped: Taxes on these products remain globally low (the median sugary drink excise tax is just 2.4% of retail price), and in many countries, these products are actually becoming more affordable.
Smart Tax Design is Crucial: The most effective taxes are substantial, simplify the tax structure, rely on specific excise taxes, and automatically adjust for both inflation and income growth.
The other reason tobacco taxes are attractive to policymakers, is that it generally raises tax revenue. Though taxes reduce consumption, cigarettes are price inelastic; and so overall tax collection increases as well.
Another general thought: context obviously matters, and so what policies and strategies to pursue of course depends on the country you are looking at. Nonetheless the review is a helpful synthesis of experiences in those 15 countries, and carries important broad lessons.
