Higher tax rates on tobacco pushed to deter smoking
abs-cbnnews.com | 04/02/2008 3:21 PM
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By Aries Rufo
abs-cbnNEWS.com/Newsbreak
BANGKOK—Governments and policy makers are being urged to impose higher taxes on tobacco products and cigarettes to curb smoking as well as deter potential new consumers of the health-risk product.
A higher tax rate is like hitting three birds in one stone—it addresses one of the biggest health problems, attacks the tobacco industry’s profits with a shrinking consumer base and increases the government’s revenue intake—all at the same time.
Experts and government officials gathered here for a workshop on the World Health Organization’s Framework Convention on Tobacco Control Article 6 stressed that raising tobacco taxes is the most effective way of controlling the health menace as shown from the success stories of other countries. Article 6 recommends increasing levies on tobacco products to combat cigarette use in Southeast Asia.
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Former deputy prime minister of Thailand Dr. Paiboon Wattanasiritham, who also chaired the Thai Health Promotion Foundation, cited his country’s experience where higher taxes have caused consumption to drop without adversely affecting the government’s revenue.
“Between 1993 and 2007, Thailand increased tobacco taxes eight times. The number of packs sold decreased from 2.135 million packs in 1993 to 1.958 million in 2007,” Wattanasiritham said.
Yet, “as the number of packs tumbled, the revenue earned soared from 15.345 million baht in 1993 to 41.528 million baht. This demonstrates that increasing taxes to reduce smoking does not necessarily mean a drop in revenue,” he said.
“The tobacco industry often tells governments that they are going to lose revenues if they increase cigarette taxes because people will buy fewer cigarettes. However it is clear that this is a myth spun to protect the industry because addicted consumers respond slowly to price increases.
Less revenue?
University of California-Berkeley Professor Teh-wei Hu said studies in Canada, South Africa and in other countries proved that higher taxes do not mean less revenue, only lesser consumption and therefore fewer smoking-related deaths.
He suggested that governments use the ideal median tax rate of 65-75 percent in the retail price of cigarettes, which balances government interests on revenue while at the same time addressing the health concern on tobacco consumption.
“This is a win-win tax rate,” Teh-wei told abs-cbnNEWS.com/Newsbreak.
Philippines: lowest rate
In the ASEAN region, Singapore and Thailand have the highest tax rate on tobacco products, 64 percent and 61 percent respectively on the retail price. The Philippines, on the other hand, has the lowest rate, at 10-30 percent.
The Philippines has four tax classifications for cigarettes—low-priced, which is slapped a tax of P2.23 per pack; medium-priced, P6.74 per pack; high-priced, P10.88 per pack, and premium, P26.06 per pack.
In contrast, other countries observe uniform and less complicated excise tax rates for cigarettes. Estimates showed that a uniform tax rate would have netted government P26 billion more in revenues than the present multi-layered scheme. On the average, income from cigarette tax amounts to P60 billion a year.
At the workshop organized by the Bangkok-based Southeast Asia Tobacco Control Alliance, it was also raised that the tobacco industry perpetuates the myth that higher tax would only encourage smuggling.
Smuggling
On the contrary, Dr. Hana Ross of the International Tobacco Research and the American Cancer Society said there is no factual correlation between higher price and tobacco smuggling as shown by the experience of some countries. She said that other factors such as geographic proximity, overproduction, availability of infrastructure to market cigarettes, trade restriction and ease on border controls facilitate smuggling.
“Smuggling does not eliminate the impact of tax increases on smoking behavior—higher taxes will improve public health even in the presence of smuggling,” Ross said.
It is estimated that illicit trade on tobacco products is now a $40-50 billion industry.
Experts say the proliferation of counterfeit and smuggled tobacco products poses grave health danger and urged government officials to undertake measures to stop it.
“The illicit tobacco trade products brings cheaper cigarettes to the markets, making it more affordable and available, especially to children. It undermines the impact of tobacco control measures,” Prof. Teh-wei said.
(First posted: 4/2/2008 10:56:22 AM)
