thesis statement about cigarette tax

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This article has a correction. Please see:

• Correction - May 01, 2012

• Frank J Chaloupka 1 ,
• Ayda Yurekli 2 ,
• Geoffrey T Fong 3
• 1 Department of Economics, University of Illinois at Chicago, Chicago, Illinois, USA
• 2 World Health Organization, Geneva, Switzerland
• 3 Department of Psychology, University of Waterloo, Waterloo, Ontario, Canada
• Correspondence to Professor Frank J Chaloupka, Economics, University of Illinois at Chicago, Institute for Health Research and Policy, University of Illinois at Chicago, Chicago, IL 60608, USA; fjc{at}uic.edu

Background Increases in tobacco taxes are widely regarded as a highly effective strategy for reducing tobacco use and its consequences.

Methods The voluminous literature on tobacco taxes is assessed, drawing heavily from seminal and recent publications reviewing the evidence on the impact of tobacco taxes on tobacco use and related outcomes, as well as that on tobacco tax administration.

Results Well over 100 studies, including a growing number from low-income and middle-income countries, clearly demonstrate that tobacco excise taxes are a powerful tool for reducing tobacco use while at the same time providing a reliable source of government revenues. Significant increases in tobacco taxes that increase tobacco product prices encourage current tobacco users to stop using, prevent potential users from taking up tobacco use, and reduce consumption among those that continue to use, with the greatest impact on the young and the poor. Global experiences with tobacco taxation and tax administration have been used by WHO to develop a set of ‘best practices’ for maximising the effectiveness of tobacco taxation.

Conclusions Significant increases in tobacco taxes are a highly effective tobacco control strategy and lead to significant improvements in public health. The positive health impact is even greater when some of the revenues generated by tobacco tax increases are used to support tobacco control, health promotion and/or other health-related activities and programmes. In general, oppositional arguments that higher taxes will have harmful economic effects are false or overstated.

• Advertising and promotion
• taxation and price
• packaging and labelling
• social psychology
• research methods
• psychosocial theories

https://doi.org/10.1136/tobaccocontrol-2011-050417

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Introduction

‘Sugar, rum, and tobacco, are commodities which are no where necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation.’ 1

For centuries, governments around the world have heeded Adam Smith's advice, imposing a variety of taxes on tobacco leaf and tobacco products. Governments have used these taxes in the pursuit of multiple goals. Historically, and still the case in many countries, the primary motivation for taxing tobacco has been revenue generation. 2 Tobacco products are a reliable source of revenue given that they are typically produced by a small number of manufacturers, have few good substitutes and, at least in the short run, have relatively inelastic demand. Some governments have levied high import duties on tobacco leaf and/or tobacco products as a way of protecting domestic tobacco farmers and manufacturers from foreign competitors. Others have imposed differential taxes on tobacco products that are higher on the products produced by multinational tobacco companies than on those made by local producers. Still others have kept taxes low on at least some products so as to keep them affordable for the poor, while generating revenues by taxing premium products at much higher rates.

Over the past 50 years, the accumulation of evidence on the health and economic consequences of tobacco use has led numerous governments, first in high-income countries and more recently in a growing number of low-income and middle-income countries, to significantly increase tobacco taxes in efforts to reduce tobacco use. These efforts have been strengthened by the growth of economic and other research demonstrating the effectiveness of higher tobacco product taxes and prices in reducing tobacco use. This research provided the strong evidence base supporting the WHO's Framework Convention on Tobacco Control (WHO FCTC) call for governments to use higher tobacco taxes to reduce tobacco use as a way to achieve their health objectives. 3 As countries have become signatories to the treaty, several have adopted significant increases in their tobacco taxes as a way to reduce tobacco use and the death, disease and economic costs that it causes.

This paper reviews the salient issues related to the effectiveness of tobacco taxation as a tobacco control strategy. We begin with an overview of the different types of tobacco taxes and tax structures used by governments around the world and discuss how these taxes impact on the prices of tobacco products. This is followed by a concise review of the research evidence on the impact of tobacco taxes and prices on tobacco use, as well as the added impact in reducing tobacco use that results from dedicating tobacco tax revenues to other tobacco control efforts. We then briefly discuss the evidence on the variety of arguments used in opposition to tobacco taxation.

Based on this, we highlight ‘best practices’ for using tobacco taxes for tobacco control. Given the voluminous literature on tobacco taxes, we draw heavily from seminal and recent publications reviewing the evidence on the impact of tobacco taxes on tobacco use and related outcomes, as well as that on tobacco tax administration, including: the World Bank's policy report Curbing the Epidemic: Governments and the Economics of Tobacco Control and several of the report's background papers contained in Tobacco Control in Developing Countries (both available online at http://www.worldbank.org/tobacco ); the International Agency for Research on Cancer's Handbooks of Cancer Prevention, Volume 14 : Effectiveness of Tax and Price Policies for Tobacco Control (available online at: http://www.iarc.fr/en/publications/list/handbooks ); and the WHO Technical Manual on Tobacco Tax Administration (available online at: http://www.who.int/tobacco/publications/tax_administration/en/index.html ). 2 4–6

Tobacco taxes: types, levels, structures and administration

(NB This section draws heavily from WHO's Technical Manual on Tobacco Tax Administration .) 2 Governments impose a variety of taxes on tobacco and tobacco products. Some apply to tobacco leaf, such as a tax on the value of the tobacco crop and duties on imports and/or exports of tobacco leaf. Most governments assess taxes on tobacco products. These taxes include: excise taxes, value added taxes (VAT), general sales taxes, duties on tobacco product imports and/or exports and/or other special taxes. Of these, tobacco product excise taxes (including other taxes specifically applied to tobacco products but called by other names) are most important for achieving the health objective of reduced tobacco consumption since these are the taxes that are uniquely applied to tobacco products and that raise the prices of these products relative to the prices of other goods and services.

Most governments levy excise taxes and other taxes on tobacco products and apply duties to imported tobacco products. (When referring to excise taxes, this paper includes other taxes uniquely applied to tobacco products, but called by other names (eg, the ‘consumption tax’ levied on cigarettes in China and the distinct general sales tax rates applied to tobacco products in Egypt).) Based on available data, about 90% of countries impose tobacco excise taxes, almost as many apply a VAT or sales tax to tobacco products, and nearly all impose import duties. 2 Countries that do not levy tobacco excises include those in the Gulf Cooperation Council, some Pacific Island and Caribbean island countries, and a few others; in many of these countries, there is little or no domestic tobacco production and governments generate tobacco revenues through duties on imported tobacco products. VAT rates vary widely, ranging from 2% to 20% in the countries that apply a VAT to tobacco products. Similarly, import duties on tobacco products vary widely with rates of more than 100% of importers' declared CIF (cost, insurance, freight) value in some countries.

Because of their importance in raising the prices of tobacco products relative to the prices of other goods and services, tobacco product excise taxes are most important for tobacco control. There are two types of excise taxes: specific and ad valorem. A specific excise tax is levied based on quantity (eg, a fixed amount per cigarette or weight of tobacco), while an ad valorem excise is levied based on value (eg, a percentage of the factory price or retail price). Tobacco product excises are generally, but not always, applied early in the distribution chain (on manufacturers or distributors).

The level and type of excise tax applied to tobacco products varies widely across countries. Figure 1 illustrates the variation in the average excise tax applied to cigarettes (in purchasing power parity (PPP) adjusted US$), the average price of the most widely sold brand of cigarettes (in PPP US$) and the percentage of cigarette price accounted for by excise and other taxes levied on tobacco products for countries grouped by income level. As the figure illustrates, there is a direct relationship between the level of the cigarette excise tax and the level of cigarette prices, with higher taxes resulting in higher prices. In addition, a clear relationship exists between taxes, prices and income levels, with the average price, average excise tax and tax as a share of price falling as income falls. Globally, excise and other taxes applied to cigarettes account for a little over half of the average price of cigarettes, falling from 65.5% in high-income countries to 40.8% in low-income countries. Similarly, the average price falls from nearly PPP US$5.00 per pack in high-income countries to almost PPP US$2.00 per pack in low-income countries. Considerable variation in taxes exists within income group, as well as across regions (see figure 2 ). 7

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Simple average price of the most sold brand in international dollars (PPP), excise tax per pack and total tax share by income group, 2010. 7 Total tax share includes excise taxes and other taxes (eg, VAT) applied to tobacco products.

Simple average price of the most sold brand in international dollars (PPP), excise tax per pack and total tax share by WHO region, 2010. 7 Column labels refer to WHO regional offices for Africa (AFRO), the Americas (AMRO), the Eastern Mediterranean (EMRO), Europe (EURO), South-East Asia (SEARO) and the Western Pacific (WPRO). Total tax share includes excise taxes and other taxes (eg, VAT) applied to tobacco products.

In addition to the variability across countries, excise taxes applied to cigarettes vary within a country as the amount and type of excise tax depends on value, characteristics of the cigarette and other factors. 2 Australia, South Africa and many other countries levy a uniform specific excise tax on all cigarettes, while India, the Philippines and others apply a tiered tax structure that imposes differential specific excises that vary based on manufacturers' prices, production scale, whether or not the cigarette is filtered, cigarette length, or other factors. Similarly, Vietnam and other countries levy a uniform ad valorem excise tax on all cigarettes, while Bangladesh and others impose differential ad valorem taxes based on price or other factors. In the European Union and several others, both types of excises are applied, with some of these varying the specific tax level and/or ad valorem tax rate based on cigarette prices, characteristics or other factors. Finally, Egypt, Turkey and a few other countries apply a minimum tax to lower priced cigarette brands, with some variation of the tax structures described above applied to higher priced brands. As summarised in table 1 , the type of excise tax applied to cigarettes varies by income level and by region.

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The types of cigarette excise taxes applied by income group and WHO region 2

Similarly, there is considerable variation across and within countries in the level and structure of taxes applied to other tobacco products. The variability in tobacco excises reflects that influence of different interest groups with different objectives, which may include: revenue generation; protection of domestic tobacco growers and/or manufacturers; keeping at least some tobacco products affordable to the poor; and protecting public health. Some governments, such as the US Federal Government, set their tobacco excises on different tobacco products so that the excises are similar across all products. Others, including most US states, apply different excises to different types of tobacco products so that the resulting share of price accounted for by tax varies widely across products. Still others employ very complex systems with different taxes applied to different brands and products based on price, type of product, product characteristics and other factors. For example, taxes in Indonesia have historically differed for manufactured cigarettes and kreteks, with lower taxes applied to the products of smaller scale manufacturers in an apparent effort to provide a competitive advantage to smaller, domestic firms over larger multinational tobacco companies. Likewise, Turkey once taxed cigarettes containing at least two-thirds oriental tobacco at lower rates than other cigarettes in an effort to protect its local tobacco monopoly from foreign competition and to increase the demand for oriental tobacco that was largely grown in Turkey. In some countries, some tobacco products are exempted completely or almost completely from tobacco excises. For example, bidis are largely untaxed in India given perceived difficulties in collecting these taxes from the large number of small producers and concerns about the regressive nature of a bidi tax.

In addition to being more difficult to administer, a more complex tax structure will undermine the health impact of tobacco excise taxes by creating greater opportunities for tax avoidance and tax evasion. In addition, more complex tax structures lead to significantly greater variability in the prices of tobacco products, which creates opportunities for substitution to cheaper brands/products in response to increased taxes (see table 2 ). Similarly, ad valorem excises on tobacco products will be less effective than specific excise taxes in achieving health objectives. Ad valorem tobacco excises are more difficult to administer, increase opportunities for tax avoidance and evasion, and create greater gaps in prices between high and low priced brands. 8 In addition to undermining the health impact of tobacco excises, more complex tax structures and/or greater reliance on ad valorem excises will also weaken the revenue impact of these taxes and increase the uncertainty of revenue projections, given the greater tax avoidance and evasion, opportunities for substitution to cheaper brands/products and dependence on industry pricing decisions.

Excise tax structure and average cigarette prices

In the future, differential taxation for different tobacco products may make sense from a harm-reduction perspective, when coupled with effective tobacco product regulation that results in significantly reduced-risk tobacco products being marketed. A differential tax structure that taxes the significantly reduced-risk products at lower rates than riskier products would likely lead many who currently use the most dangerous products to switch to the new, significantly reduced-risk ones. This type of differential treatment might work best in the short term, accelerating the transition from the most harmful products to reduced-risk products; over time, the differential treatment could be eliminated to reduce all tobacco product use. However, given the current evidence on the relative risks of different tobacco products, differential taxation based on RR is highly controversial and adopting this strategy could have unanticipated public health consequences.

Tax, price and tobacco use

Economists and other researchers have taken advantage of the extensive variation in tobacco taxes across and within countries as well as over time to examine the impact of tobacco product taxes and prices on tobacco use. (See IARC Handbook 14 for a comprehensive review of the research discussed in this section.) 6 Prior to the publication of the World Bank's Curbing the Epidemic , nearly all studies came from high-income countries. 4 These studies consistently found that increases in taxes and prices on tobacco products lead to reductions in tobacco use. The vast majority of studies from high-income countries have produced estimates of price elasticity (the percentage reduction in consumption resulting from a 1% increase in price) in the range of −0.25 to −0.5, with most clustered around −0.4. 9–11 Several modelled the addictive nature of tobacco use, finding that tobacco demand is more price responsive in the long run than in the short run. 12 13

Over the past decade, many studies have examined the impact of taxes and prices on tobacco use in low-income and middle-income countries. These studies produce a wide range of estimated price elasticities, with most, but not all, indicating that demand for tobacco products in low-income and middle-income countries is at least as responsive, and often more responsive, to price than it is in high income countries. For example, Hu and Mao estimated that the price elasticity of cigarette demand in China ranges from −0.50 to −0.64, while John estimated price elasticities in the range from −0.86 to −0.92 for bidis and −0.18 to −0.34 for cigarettes in India. 14 15

Findings from studies based on survey data of adult tobacco use show that taxes and prices influence the prevalence of tobacco use and amount of tobacco consumed by users. In general, estimates from high-income countries suggest that about half of the impact of price on tobacco use results from its effect on prevalence, largely reflecting cessation among adult users. 16 17 This is confirmed by studies that find that increases in prices lead current users to try to quit, with some successful in doing so in the long run. 18 19 Comparable studies from low-income and middle-income countries also find that cigarette prices affect prevalence and intensity of cigarette smoking, although the relative impact on prevalence and consumption varies considerably across studies/countries. 20 21

Several studies have examined the differential responses to price of population subgroups, including those based on age, gender, income, education, race/ethnicity and location (urban vs rural). Consistent patterns are evident with respect to differences by age and socioeconomic status (SES). Studies looking at tobacco use among adolescents and young adults find that young people are two to three times more responsive to tax and price than are older persons, with higher taxes and prices particularly effective in keeping young people from moving beyond experimentation with tobacco, and preventing them from becoming regular and, eventually, addicted users. 22 23 Research from high-income countries generally finds that lower SES populations are more responsive to price than are higher SES populations. 17 24 Comparable studies from low-income and middle-income countries produce mixed findings, with some finding a socioeconomic gradient in price elasticities and others finding little difference among different SES groups. 25 26

Finally, several studies examine substitution among tobacco products in response to changes in their relative prices. These studies generally find that part of the reduction in the use of one tobacco product in response to an increase in its price will be offset by increased use of other tobacco products if the prices of these products are not also increased. 27 28 This substitution highlights the importance of increasing taxes and prices for all tobacco products if the public health benefits of higher prices are one of the motives for tobacco tax increases.

To summarise, a large and growing literature clearly demonstrates that the overall demand for tobacco products is significantly affected by changes in tobacco product taxes and prices, with tobacco use among the young and lower SES populations most affected. These studies demonstrate that price affects all aspects of tobacco consumption, with higher prices preventing initiation among potential users, inducing cessation among current users, and reducing the frequency of consumption and amount consumed by continuing users, while changes in the relative prices of tobacco products will lead to some substitution among products.

Tobacco tax revenues and funding for tobacco control and health promotion

(NB This section draws on WHO's Technical Manual on Tobacco Tax Administration .) 2 As described in the previous two sections, tobacco taxes account for a fraction of tobacco product prices and the percentage reduction in tobacco use resulting from a price increase is smaller than the percentage increase in price in most countries. As a result, tobacco tax increases will increase tax revenues over the short to medium term. (For example, if the price elasticity of cigarette demand is −0.8 and cigarette excises account for half of cigarette prices, a doubling (100% increase) of the cigarette tax will lead to a 50% increase in cigarette prices and a 40% reduction in cigarette consumption. The resulting 60% of consumption will be taxed at twice the original rate, leading to a 20% increase in revenues.) A growing number of governments have used the revenues generated by tobacco excise tax increases to fund a variety of tobacco control activities and/or other health promotion efforts, while others have used these revenues to finance parts of their healthcare systems. Around 38 countries around the world earmark part or all their tobacco taxes for specific programmes, but relatively few governments earmark tobacco tax revenues for tobacco control efforts and those that do tend to allocate only a small percentage of tax revenues to these efforts. There are some notable exceptions; California's Proposition 99 that increased the state's cigarette tax from US$0.10 to US$0.35 in 1989, for example, dedicated 20% of new tobacco tax revenues to a comprehensive tobacco control programme and an additional 5% of the new revenues to tobacco-related research. Several others dedicate tobacco tax revenues to other health-related programmes, but again, this is relatively uncommon and the percentage of revenues dedicated to these programmes is typically small. Thailand is a good example of a country that has done this, with a 2% surtax on tobacco products and alcoholic beverage that funds the ThaiHealth Foundation, which supports a variety of health promotion activities.

The relatively limited earmarking of tobacco tax revenues for tobacco control and/or other health-related programmes happens despite the evidence demonstrating that this type of earmarking increases political and civil society support for tobacco tax increases. This is likely the result of general opposition to earmarking because of the rigidities it introduces into the budgetary process that limits the use of revenues for alternative purposes, discourages the optimal allocation of resources, and, as a result, reduces social welfare. From a public finance perspective, the strongest support for earmarking results from the principle of benefit taxation and user fees, that states that the revenues generated from a tax should be used to provide benefits to those paying the tax. For tobacco taxes, one could argue that tobacco users will be the greatest beneficiaries of tobacco control programmes that promote cessation and prevent initiation of tobacco use, as well as of health promotion and healthcare programmes funded by the tax, given the greater use of healthcare services by tobacco users.

In places where governments have earmarked tobacco tax revenues for tobacco control efforts, the activities supported by these funds have led to additional reductions in tobacco use. In the US, for example, several states use tobacco tax or other tobacco-related revenues to fund comprehensive tobacco control programmes that provide support for cessation efforts, mass media public education campaigns, policy development and implementation and more. 29 Research shows that increased funding for these programmes leads to reductions in overall tobacco use, adult smoking and youth smoking. 30–32 In Thailand, 2% of tobacco and alcohol tax revenues are earmarked for ThaiHealth, supporting a variety of health promotion activities, including tobacco prevention and cessation efforts.

Oppositional arguments: myths and facts

While the evidence on the effectiveness of tobacco tax increases in reducing tobacco use and its consequences is clear, as summarised above, a variety of stakeholders including tobacco farmers, tobacco product manufacturers, tobacco product retailers and others often oppose increases in tobacco taxes. (See IARC Handbook 14 for a comprehensive review of the research discussed in this section.) 6 Arguments used in opposition to increased tobacco taxes have generally focused on the economic impact of higher taxes, including their effects on government revenues, businesses and the poor, as well as their role in stimulating illicit trade. However, as demonstrated by extensive research evidence, the arguments about the adverse economic impact of increased tobacco taxes are misleading, overstated, or false. 4–6 33 This section briefly reviews these arguments and the evidence on them.

Impact of tobacco tax increases on revenues

One frequently made claim is that higher tobacco taxes will lead to sharp reductions in governments' tobacco tax revenues as tobacco use falls and tax avoidance and evasion increases. However, as experiences in numerous countries indicate, an increase in tobacco taxes will increase nominal tax revenues in the short to medium term, even when combined with other policies aimed at reducing tobacco use. As tobacco use falls over time, nominal tax revenues will gradually decline, but it will be many years before they fall below their pre-tax-increase level. In contrast, failing to increase tobacco tax rates to keep pace with inflation will lead to reductions in the real value of tobacco tax revenues over time.

With respect to the effects of tobacco tax increases on tobacco tax revenues, the relatively low share of taxes in prices and the less than proportionate reduction in sales in response to a price increase imply that a tobacco tax increase will lead to an increase in tobacco tax revenues. Over time, inflation will erode the value of tobacco tax revenues, unless these taxes are increased often enough to keep pace with inflation. Similarly, as tobacco use declines in response to other tobacco control efforts, revenues from tobacco taxes will also decline, unless taxes are increased periodically. Nevertheless, tax revenues will remain higher many years after a significant tax increase than they were before, even in the wake of a considerable decline in tobacco use. California may be the best example of this, given its cigarette tax increases in 1989 (from 10 to 35 cents), 1994 (from 35 to 37 cents) and 1999 (from 37 to 87 cents), and its sustained comprehensive tobacco control programme funded by earmarked revenues. In the last full fiscal year before the 1989 tax increase, California's gross cigarette tax revenues were just over US$250 million; in the most recent fiscal year (FY10), California's gross cigarette tax revenues were over US$845 million. The more than tripling of revenues occurred despite tax paid cigarette sales falling by more than 60% as a result of the tax and price increases, activities funded by earmarked tax revenues and strengthening of other tobacco control policies.

Impact of tobacco control policies on business

A second argument commonly used in opposition to higher tobacco taxes is that these policies will reduce business activity and cause significant job losses. This argument is based on the notion that some involvement of a business with tobacco implies a dependence on tobacco (eg, that retailers that sell tobacco products or advertising agencies that develop marketing campaigns are financially dependent on the continued use of these products). The reality is that very few tobacco-related jobs are actually dependent on tobacco (most notably tobacco growing and tobacco product manufacturing) and that the economic contribution from tobacco-dependent activities is very small and declining in most countries. 34

While the significant declines in tobacco use that result from higher tobacco taxes do lead to reductions in employment in and the economic contribution of the tobacco-dependent sectors of the economy, these losses are typically more than offset by increased economic activity and employment in other sectors as the money once spent on tobacco is now spent on other goods and services and as governments spend the increased tax revenues. 6 35 This net positive impact results from the relatively capital-intensive nature of tobacco production relative to the more labour-intensive production of other goods and services.

Impact of tobacco control policies on the poor

The argument that increased tobacco taxes will adversely impact the poor is frequently used in opposition to proposed tax increases and is based on the evidence that existing tobacco taxes are regressive (ie, that those on lower incomes bear a disproportionate share of the tobacco tax burden). The regressivity of existing tobacco taxes results, in part, from the greater concentration of smoking among the lowest income populations, one result of which is that these populations also bear a disproportionate share of the burden of disease caused by tobacco.

The regressivity of existing taxes, however, does not necessarily imply that tax increases are regressive as well. In many countries, tobacco use among the lowest income/SES populations is most responsive to price, while use among the highest income/SES populations is least responsive. Thus, a tax increase that raises tobacco product prices will lead to the largest declines in smoking among the lowest income persons, and the burden of tax increase will fall more heavily on higher income consumers whose smoking behaviour changes little in response to the tax increase. 6

It is true, however, that low-income persons who continue to use tobacco following a tax increase will be adversely affected. To the extent that the new revenues generated by tobacco tax increases are allocated to programmes targeting the poor, including tobacco control programmes, this concern is at least partially alleviated. For example, several governments have earmarked tobacco tax revenues for programmes that provide cessation products and counselling to low income smokers interested in quitting, while many focus on reducing income-related and other disparities in tobacco use and its consequences. Still others have dedicated new tobacco tax revenues to public health insurance programmes for low-income populations and/or other poverty alleviation efforts. 2

Tobacco taxation and black markets

A final argument used in opposition to increased tobacco taxes is that the higher taxes will stimulate significant tax avoidance among tobacco users and create a black market in tobacco products, resulting in lost tax revenues and fewer public health benefits. While it is true that higher taxes do create greater incentives for tax avoidance and evasion, the extent of the problem has been significantly overstated. In addition, other factors such as the extent of corruption, informal distribution channels and the presence of organised criminal networks can be more important determinants of illicit tobacco trade than are tobacco taxes. One recent review, for example, estimates that 11.6% of the global cigarette market is illicit, with a relatively higher share in low-income, low-tax countries and a lower share in high-income, higher-tax countries. 36

As discussed in the World Bank's Curbing the Epidemic , tobacco tax increases will still generate increases in tax revenues and reductions in tobacco use, even when tax avoidance and evasion increase. 4 The World Bank states that the appropriate response is not to forego tax increases, but instead to crack down on illicit trade in tobacco products. Governments that have strengthened their tax administration, increased enforcement, imposed swift and severe penalties, and worked collaboratively with others in their region have been effective in reducing tax avoidance and evasion and in maximising the health and revenue impact of higher tobacco taxes. 6

Best practices in tobacco taxation

(NB This section draws heavily from WHO's Technical Manual on Tobacco Tax Administration .) 2 Based on the accumulated empirical evidence and published literature described briefly above, several ‘best practices’ in tobacco taxation have emerged. 2 These best practices emphasise the health impact of tobacco taxes while also recognising the importance of revenue objectives and represent a roadmap that most countries can readily implement.

Use tobacco excise tax increases to achieve the public health goal of reducing the death and disease caused by tobacco use

Extensive economic and other research has clearly demonstrated the effectiveness of higher tobacco product taxes and prices in reducing tobacco use and its consequences, particularly among the poor and the young. Given this evidence, increases in tobacco taxes are central to the WHO FCTC.

Set tobacco excise tax levels so that they account for at least 70% of the retail prices for tobacco products

Tobacco excise taxes in nearly all countries account for <70% of retail prices, with taxes in most accounting for less than half of retail prices. Raising tobacco taxes so that they account for at least 70% of retail prices would lead to significant price increases, induce many current users to quit and deter numerous young people from taking up tobacco use, leading to large reductions in the death and disease caused by tobacco use. It is important to note that this best practice focuses on tobacco excise taxes (or other tobacco-specific taxes) and not on all taxes applied to tobacco products, given that tobacco-specific taxes are the ones that lead to increases in the relative prices of tobacco products and to reductions in tobacco use. In the few countries that have already reached this threshold, further increases in tobacco taxes in line with other best practices described below would be appropriate.

Simpler is better

Complex tax structures are difficult to administer, create opportunities for tax avoidance and evasion, and are less effective in achieving public health and revenue goals. In countries with complex tax structures, an appropriate transition strategy involves reducing the variations in taxes over time with the aim of implementing a single uniform tax on a given tobacco product. Countries with multiple tiers based on price should reduce the number of tiers over time, eventually ending up with a single uniform tax. Similarly, countries that levy different taxes based on product characteristics should reduce and eventually eliminate these differential taxes.

Rely more on specific tobacco excises as the share of excise taxes in retail prices increases

Greater reliance on specific excise taxes maximises the impact of tobacco taxes on public health by reducing the gap in prices between premium and low priced alternatives, thereby limiting opportunities for users to switch down in response to tax increases. Applying the same specific tax to all brands of a given tobacco product also sends the clear message that all brands are equally harmful. For countries that currently rely on an ad valorem tax or a mix of ad valorem and specific taxes, an appropriate first step would be to set a sizeable specific tax that applies to all brands with an ad valorem tax applied above this. Over time, the ad valorem rate could be reduced with greater increases in the specific tax so that the total tax increases as a share of retail price, and so that the specific tax accounts for a greater share of the total excise tax.

Rely more on excise taxes than on import duties

The effectiveness of import duties in generating higher revenues and increasing retail prices has been decreasing as countries adopt bilateral, regional and global trade agreements. Consequently, relying on specific tobacco excises would ensure the health impact of tobacco taxes as well as the sustainability of tobacco tax revenues. For countries that currently rely heavily on import duties from tobacco products, an appropriate transition strategy would be to reduce import duties over time while adopting and increasing specific tobacco excises so that total taxes on tobacco products are increasing.

Adopt comparable taxes and tax increases on all tobacco products

Increasing excise taxes on some tobacco products but not on others results in changes in the relative prices of these products that induce substitution towards relatively less expensive products. Comparable increases in the taxes on all tobacco products maximise the public health impact of tobacco tax increases by minimising opportunities for substitution.

Eliminate tax and duty free sales of tobacco products

Article 6 of the WHO FCTC calls for the prohibition (or restriction) of sales and importations by international travellers of tax and duty free tobacco products. Doing so increases the public health impact of higher tobacco taxes by raising all tobacco product prices and by reducing opportunities for tax avoidance while at the same time generating additional revenues.

Automatically adjust specific tobacco taxes for inflation

Unless regularly adjusted, the real value of specific tobacco taxes will fall over time as general price levels increase. When this happens, the real value of tobacco taxes revenues falls and the effectiveness of the tax in reducing tobacco use and promoting health will be diminished. Governments can avoid this by establishing a mechanism for automatically adjusting specific taxes so as to keep pace with inflation.

Increase tobacco taxes by enough to reduce the affordability of tobacco products

In many low-income and middle-income countries, tobacco use increases as national income rises and national income is rising faster than tobacco product prices, so that these products are becoming more affordable. In order to maximise the health impact of higher tobacco taxes, governments should raise taxes so as to raise prices and reduce the affordability of tobacco products by ensuring that real price increases exceed increases in real incomes.

Include tobacco excise tax increases as part of a comprehensive strategy to reduce tobacco use

In addition to higher tobacco taxes, governments should adopt a comprehensive strategy for reducing tobacco use that includes, but is not limited to, comprehensive smoke-free air policies, total bans on tobacco company marketing activities, strong warnings about the consequences of tobacco use, broad efforts to help current users quit and mass media public education campaigns. A comprehensive strategy leads to greater reductions in the consequences of tobacco use, builds public and political support for higher taxes and maximises the effectiveness of tax increases in achieving health objectives.

Use a portion of tobacco tax revenues to support other tobacco control and/or health promotion efforts

Increases in tobacco taxes generate revenues that can be used to support a variety of activities, including other tobacco control interventions and health promotion efforts that result in greater reductions in tobacco use than from the tax increase alone. Experiences in many countries show that public support for higher taxes is greater when some of the increased revenues are used to support such programmes. While hard earmarking (legally binding earmarking) of tobacco tax revenues for tobacco control and other health promotion efforts may be infeasible in some countries, soft earmarking (non-binding but accepted earmarking) of tax revenues should be possible in all countries.

Do not view low taxes and prices for some tobacco products as a ‘pro-poor’ policy

Keeping tobacco taxes and prices low on some products, so as to ensure affordability of these products for the poor leads to greater tobacco use among the poor, causing them to bear a disproportionate share of the burden of the health and economic consequences of tobacco use and increasing the risk of future poverty. High tobacco taxes on all tobacco products lead to greater reductions in tobacco use among the poor and to a progressive distribution of the health and economic benefits that result: a truly ‘pro-poor’ policy.

Do not allow concerns about the regressivity of higher tobacco taxes to prevent tobacco tax increases

Tobacco tax increases can be progressive given differences in price responsiveness by income, with higher taxes increasing the overall share of tobacco taxes paid by higher income groups. If concerns about the impact of tax increases on the poor remain, these can be offset by using revenues generated from a tax increase to support efforts to help poor tobacco users quit, other health promotion efforts targeting the poor and/or other programmes directed to those in poverty.

Do not allow concerns about employment impact to prevent tobacco tax increases

Reductions in tobacco-dependent employment following tax increases are offset by increases in employment in other sectors as spending on tobacco products is replaced by spending on other goods and services. In most countries, it is likely that there will be either no net impact on jobs or, more likely, a small increase in jobs following a tax increase. If concerns exist about job losses in tobacco-dependent sectors, using a portion of new tobacco tax revenues to move tobacco farmers into other crops and/or to retrain those employed in tobacco product manufacturing for work in other sectors can reduce these concerns.

Do not allow concerns about the inflationary impact of higher tobacco taxes to deter tax increases

In most countries, tobacco taxes are a low share of tobacco product prices and/or little weight is given to tobacco product prices in computing national price indices, implying that tobacco tax increases will generally have a small impact on inflation. In countries where tobacco products have more significant weight in national price indices, a significant tax increase will have a greater impact on inflation. 2 If there are concerns about the inflationary impact of a tobacco tax increase given that wages or some government spending may be tied to a price index, governments can reduce these concerns by using a price index that excludes tobacco products. While this makes the price index less representative of consumer spending, several governments already exclude a variety of controversial products, including tobacco products, alcoholic beverages and gaming from the price index they use for adjusting wages and/or other government spending.

Strengthen tobacco tax administrators' capacity to monitor tobacco product markets and evaluate the impact of tobacco tax increases

Regardless of how well the tax system is integrated between the tobacco manufacturers and tax administrators, tax authorities should ‘trust but verify’ by adopting technologies for monitoring the production and distribution of tobacco products, maintaining physical control over these products as they move through the distribution chain and auditing taxpayer account books periodically. If one does not already exist, a tobacco excise department should be established. This department should collaborate with Customs to minimise non-compliance and monitor trade, as well as with tax authorities from neighbouring countries and regional and global organisations. It should also maintain a comprehensive database for use in assessing tobacco product markets, conducting demand analyses and evaluating current tobacco taxes and the impact of increases in these taxes. Such efforts will be most effective when done in cooperation and collaboration.

Adopt new technologies to strengthen tobacco tax administration and minimise tax avoidance and evasion

Up-to-date technologies should be adopted in order to increase efficiency of tax collection and minimise tax avoidance and evasion. These new technologies include more sophisticated, harder to counterfeit tax stamps and tracking-and-tracing systems that can be used to follow tobacco products through the distribution chain. When needed, adoption of these technologies could be financed by small increases in tobacco excise taxes; in most countries, the adoption of these technologies would more than pay for itself through the revenues collected on products for which taxes would otherwise not have been paid.

Strengthen tobacco tax administrators' capacity by licensing all involved in tobacco product manufacturing and distribution

Licensing of all involved in tobacco production and distribution facilitates monitoring of tobacco product markets, makes it easier to identify illicit tobacco products and increases administrators' ability to identify and penalise those engaged in tax evasion. This is particularly true when done in combination with the adoption of the technologies discussed above.

Ensure certain, swift and severe penalties for those caught engaging in illicit trade in tobacco products

Strong tobacco tax enforcement increases the likelihood that those engaging in illicit trade will be caught, while high administrative penalties raise the swiftness and severity of punishment for illegal activity. Stronger enforcement efforts would likely pay for themselves through increased taxes collected on previously untaxed products. Enforcement efforts are most effective when targeted at those running the illicit operation rather than focused on those at the end of the illicit product distribution chain.

Conclusions

Tobacco excise taxes are a powerful tool for improving health while at the same time being a reliable source of government revenues. Significant increases in tobacco taxes that result in higher tobacco product prices encourage current tobacco users to stop using, prevent potential users from taking up tobacco use and reduce consumption among those that continue to use, with the greatest impact on the young and the poor. As a result, higher taxes are effective in reducing the death, disease and economic costs caused by tobacco use. The positive health impact is even greater when some of the revenues generated by tobacco tax increases are used to support tobacco control, health promotion and/or other health-related activities and programmes.

The experiences with the variety of and changes to taxes and tax structures applied to tobacco products around the world provide an extensive evidence base for identifying best practices in tobacco taxation. These best practices include: adoption of a relatively simple tax system that applies equivalent taxes to all tobacco products; increases in these taxes that exceed increases in consumer prices and incomes so as to reduce the affordability of tobacco products; minimisation of incentives for tobacco users to switch to cheaper brands or products in response to tax increases; and reduced opportunities for tax avoidance and evasion. This type of tax system will have the greatest public health impact, while at the same time producing a reliable stream of tax revenues. Such a system will be most effective when combined with strong tax administration, including the use of a state-of-the-art monitoring, tracking and tracing system that includes high-tech tax stamps and licensing of all involved in the production and distribution of tobacco products, coupled with adequate enforcement and swift, severe penalties on violators.

Despite the evidence on the beneficial revenue and public health impact of higher tobacco taxes, there are many barriers to increasing tobacco taxes that are often based on economic arguments. These range from concerns about the macroeconomic effects of higher taxes (eg, on employment and inflation) to concerns about the regressivity of tobacco taxes and the impact of higher taxes on the poor. In general, these arguments are false or overstated. Increasing tobacco taxes will not lead to net job losses in most countries, but rather to job gains as resources are shifted to more labour intensive sectors of the economy. Similarly, inflationary fears are overstated, with tax increases having little impact on inflation in most countries. Concerns about the impact on the poor are offset by the progressive nature of the health benefits of reduced tobacco use in response to higher taxes and can be further offset by using some of the revenues generated from these taxes for programmes targeting the poor. While the global evidence demonstrate that this can be helpful, local data and research demonstrating the positive public health and economic impact of higher tobacco taxes will be particularly useful in overcoming these arguments.

What this paper adds

Extensive economic research clearly demonstrates that increases in tobacco excise taxes are a highly effective tobacco control strategy. Higher taxes that increase prices lead adult tobacco users to quit, prevent former users from restarting, deter youth uptake of tobacco use and reduce consumption of tobacco products by continuing users.

At the same time, increases in tobacco taxes raise revenues that can be used to support other efforts to reduce tobacco use, adding to the public health impact of the higher taxes. Oppositional arguments about the economic effects of tobacco tax increases are either false or overstated.

This paper reviews the salient issues related to the effectiveness of tobacco taxation as a tobacco control strategy, providing a concise summary of the voluminous literature on tobacco taxes, their impact on tobacco use and related outcomes, the economic impact of increased tobacco taxes and best practices in tobacco tax administration.

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Competing interests None.

Provenance and peer review Commissioned; internally peer reviewed.

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• Editorial Tobacco control at twenty: reflecting on the past, considering the present and developing the new conversations for the future Ruth E Malone Kenneth E Warner Tobacco Control 2012; 21 74-76 Published Online First: 16 Feb 2012. doi: 10.1136/tobaccocontrol-2012-050447

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Increasing the Cigarette Tax

3 Pages Posted: 20 Jul 2021

Julian Reif

University of Illinois at Urbana-Champaign

Date Written: February 18, 2014

This report estimates the revenue and distributional effects of increasing the state’s cigarette excise tax by $0.50 per pack from $1.98 to $2.48. After taking into account the behavioral responses of smokers, Reif estimates that the tax increase would raise up to $175 million per year and reduce Medicaid expenditures by almost $1 million per year. The amount of revenue generated depends on the extent to which a tax rate increase would boost tax avoidance in large border cities like Chicago. Although cigarettes are predominantly consumed by the poor, many would significantly decrease their consumption in response to the tax, thereby mitigating some of their tax burden. Moreover, if smokers are not making rational, well-informed decisions, then economic theory predicts that an increase in the cigarette tax may benefit them by encouraging healthier behavior.

Keywords: index, policy, tax, revenue, smokers, economic, programs, cigarette

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University of illinois at urbana-champaign ( email ).

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Article Contents

Introduction, declaration of interests, acknowledgments.

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Cigarette Excise Tax Structure and Cigarette Prices: Evidence From the Global Adult Tobacco Survey and the U.S. National Adult Tobacco Survey

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Frank J. Chaloupka, Deliana Kostova, Ce Shang, Cigarette Excise Tax Structure and Cigarette Prices: Evidence From the Global Adult Tobacco Survey and the U.S. National Adult Tobacco Survey, Nicotine & Tobacco Research , Volume 16, Issue Suppl_1, January 2014, Pages S3–S9, https://doi.org/10.1093/ntr/ntt121

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The importance of tobacco tax structure in determining the relative prices of different tobacco products and brands has become increasingly recognized. The structuring of tobacco tax across products and brands within a country can impact the variability of prices within a country, shaping consumption and influencing tobacco users’ incentives to switch down to cheaper alternatives in response to tax and price increases.

Brand-specific data on the average prices paid for the top 5 cigarette brands in 13 countries were obtained from the Global Adult Tobacco Survey, and for the United States, data were obtained from the National Adult Tobacco Survey. The variability of cigarette prices paid across brands was analyzed in the context of each country’s tobacco tax structure.

Countries with simpler cigarette tax structures, particularly those that emphasize specific taxes and do not involve tier-based taxes, exhibit less variability in the prices smokers pay for cigarettes across brands.

Increases in cigarette taxes in countries with simpler tax structures will be more effective in reducing cigarette smoking and its health and economic consequences than comparable tax increases in countries where tax structures are more complicated and there are greater opportunities for switching to cheaper brands in order to avoid a tax increase.

Extensive evidence demonstrates the effectiveness of increases in cigarette and other tobacco product excise taxes in reducing tobacco use and its consequences. In its recent comprehensive review of the global evidence, the International Agency for Research on Cancer ( IARC, 2011 ) concluded that there was sufficient evidence that higher tobacco product taxes and prices result in a decline in overall tobacco use; reduce the prevalence of adult tobacco use; induce current tobacco users to quit; lower the consumption of tobacco products among continuing users; reduce the prevalence of tobacco use among young people; reduce the initiation and uptake of tobacco use among young people, with a greater impact on the transition to regular use; and lead to larger reductions in tobacco use among young people than among adults. However, IARC also concluded that the evidence was more mixed concerning differences in the impact of tax and price increases on tobacco use by income levels, both across countries and within countries (particularly low- and middle-income countries), attributing this mixed evidence at least in part to the availability of a variety of low-priced brands and products in some countries, which allow tobacco users to switch down to cheaper alternatives in response to tax and price increases.

In recent years, the importance of tobacco tax structure in determining the relative prices of different tobacco products and brands has become increasingly recognized. Governments in different countries apply a wide variety of taxes on tobacco products, from import duties on tobacco leaf and manufactured tobacco products to the value added or sales taxes that apply to these and many other goods and services ( World Health Organization [WHO], 2010 ). However, tobacco product excise taxes (or other taxes uniquely levied on tobacco products) are particularly important given that these are the taxes that directly influence the relative prices of tobacco products and, as a result, are the taxes that will have the greatest impact on tobacco use.

Tobacco product excise taxes take two forms—specific (per unit) taxes or ad valorem (value-based) taxes. Globally, cigarette excise tax structures vary considerably, with some governments applying relatively simple tax structures that impose the same specific or ad valorem rate on all cigarettes, while others adopt more complex multitiered structures that impose different rates on cigarettes with different characteristics (e.g., price, length, presence of filter, and/or other factors), and still others use a combination of specific and ad valorem taxes ( WHO, 2010 ). In many countries, other tobacco products are often taxed at quite different rates than are cigarettes (e.g., very low taxes on bidis in India, relative to the taxes on manufactured cigarettes, and the differential taxation of manufactured and fine cut tobacco in many European Union [EU] countries).

These differences in tobacco excise tax structure reflect governments’ revenue and health objectives, as well as their responses to the competing and varied interests of those potentially affected by tobacco taxes ( WHO, 2010 ). Historically, the primary objective of tobacco taxes in most, if not all, countries has been revenue generation. However, as evidence has grown about the health and economic consequences of tobacco use and the influence of price on the demand for tobacco products, a growing number of governments have used higher tobacco taxes to discourage tobacco use. The resulting tobacco tax structures reflect government’s interests in raising revenues, reducing the health and economic costs caused by tobacco use, and/or accounting for the externalities caused by tobacco use. In at least some countries, they also result from interests in protecting domestic tobacco growers and/or local tobacco companies, while in others reflect governments’ desire to ensure that at least some products are available at low price to poor consumers ( WHO, 2010 ).

Economic theory indicates that the choice of tobacco excise tax structure will have a significant impact on a government’s ability to achieve its objectives ( WHO, 2010 ). Uniform specific taxes on cigarettes are relatively easy to administer as the same tax applies to all cigarettes. In contrast, price-based multitiered specific taxes and ad valorem taxes are more difficult administratively, requiring some determination of value, which can be subject to manipulation and, as a result, strong tax administration in order to deter tax avoidance. The value of specific taxes will fall over time unless tax rates are regularly adjusted for inflation. The revenues generated by ad valorem taxes are more sensitive to industry pricing decisions than revenues generated by specific taxes, with ad valorem taxes rising as prices rise but falling in response to industry price cuts. As income grows, both will need to be increased to reduce the affordability of tobacco products. The multiplier effect of an ad valorem tax creates disincentives for the production of higher “quality” products when compared with a specific tax, leading to greater availability of relatively low-priced, low “quality” products. Tax structures that use a mix of specific and ad valorem taxes incorporate the strengths and weaknesses of both types of excises while adding to the administrative complexity.

Though economic theory provides strong predictions about the effects of alternative tax structures, empirical evidence on the impact of structure on outcomes such as cigarette and other tobacco product prices, tobacco tax revenues, and tobacco use is almost nonexistent. One recent paper took advantage of the variability in cigarette tax structures in European countries that results from the EU’s directive on tobacco taxes that sets a minimum for cigarette taxes (both in absolute terms and as a percentage of price for the most popular brand category), requires a mix of specific and ad valorem excises, and provides a range for the share of the total tax that must be accounted for by the specific tax, to explore these issues ( Chaloupka, Peck, Tauras, Xu, & Yurekli, 2010 ). These researchers found that greater reliance on specific excise taxes narrowed the gap in prices between high- and low-priced cigarette brands, reducing opportunities for smokers to substitute to cheaper brands in response to increases in taxes and prices. Similarly, they found that average cigarette prices were higher in countries where the specific tax accounted for a greater share of the total excise on cigarettes. They also found that cigarette consumption was lower in countries that rely more on specific excises (as expected, given the findings for cigarette prices) and that, for the same total excise tax, greater reliance on the specific tax was associated with higher cigarette excise tax revenues and less variability in these revenues over time.

Two recent papers focused on the impact of recent changes in tobacco taxes in Spain, which included imposition of and increases in a minimum specific cigarette tax and, eventually, a minimum specific tax on fine cut tobacco, along with ad valorem taxes on pipe tobacco and cigars ( López-Nicolás, Badillo-Amador, & Cobacho, 2013a ; López-Nicolás, Cobacho, & Fernández, 2013b ). One found that the increase in taxes, particularly on lower priced cigarettes, was effective in reducing sales of manufactured cigarettes, but the increased tax and price differential between manufactured cigarettes and fine cut tobacco led to increased market share for fine cut tobacco ( López-Nicolás et al., 2013b ). The other found that the tax increases had little impact on smoking prevalence in Spain, likely due to the availability of fine cut tobacco as a substitute for manufactured cigarettes ( López-Nicolás et al., 2013a ).

This paper adds to the very limited empirical evidence on the impact of tobacco excise tax structure by looking at the associations between cigarette tax structure and cigarette prices, using data on self-reported cigarette prices taken from the Global Adult Tobacco Survey (GATS) conducted by 13 low- and middle-income countries between 2008 and 2011 and from the National Adult Tobacco Survey (NATS) conducted in the United States in 2009–2010. The data from these surveys show that there is greater price variability in countries that use more complicated cigarette tax structures, while the least variability exists in countries with a uniform specific tax or a mixed system with a minimum tax that effectively works like a uniform specific tax. Since wider price variability incentivizes consumption, these findings provide additional support for the use of a uniform specific tax on cigarettes as the tax structure that is likely to have the greatest public health impact. In addition to sending the clear message that all cigarettes are equally harmful, a uniform specific tax, by narrowing price gaps, is expected to reduce opportunities for smokers to switch down to cheaper brands as cigarette taxes and prices rise. This evidence is particularly timely as Parties are currently in the process of developing tobacco tax guidelines for Article 6 of the WHO’s Framework Convention on Tobacco Control ( WHO, 2003 ).

Brand-specific average cigarette prices for 13 countries are obtained from the GATS ( Centers for Disease Control and Prevention, 2012 ) and from the U.S. NATS ( Engstrom & Mariolis, 2010 ). GATS is a nationally representative household survey of noninstitutionalized men and women aged 15 years and older. It has been conducted in 15 countries in various years from 2008 to 2011 and is in progress or planned for several others. GATS assesses individual tobacco use behaviors, attitudes, and the tobacco-related environment, and includes module that captures individual spending on tobacco products. GATS data from Bangladesh, China, Egypt, India, Mexico, the Philippines, Poland, Romania, the Russian Federation, Thailand, Ukraine, Uruguay, and Vietnam are used in this analysis.

Responses from this module were used to calculate the price each individual paid and the brand purchased at their most recent purchase, using the questions:

1. “The last time you bought cigarettes for yourself, how many cigarettes did you buy?” to obtain the unit of purchase (individual cigarettes, packs, or cartons) and the number of cigarettes in each unit.

2. “How much did you pay for this purchase?” to obtain the overall purchase amount in local currency.

3. “What brand did you buy the last time you purchased cigarettes for yourself?” to obtain brand.

For each smoker, the price per stick was calculated by dividing the reported purchase cost by the number of cigarettes purchased. This was then multiplied by 20 to calculate the price per 20 cigarettes. In each country, the average of this price was computed for each brand family smokers reported purchasing. Comparable data on cigarette purchases and price paid were obtained for the United States from the 2009–2010 NATS, a nationally representative, stratified landline and cell phone-based survey of tobacco use among the adult (aged 18 years and older) noninstitutionalized population ( Engstrom & Mariolis, 2010 ).

Information on the cigarette excise tax structure in each country was obtained from a variety of sources, including the tobacco economics reports produced by the Bloomberg Global Initiative to Reduce Tobacco Use ( www.tobaccofreeunion.org/content/en/217 ), Euromonitor International’s country-specific reports ( www.euromonitor.com ), the Tobacco Atlas ( www.tobaccoatlas.org ), and the WHO, Tobacco Free Initiative’s tobacco taxation data from its periodic reports on the global tobacco epidemic ( www.who.int/tobacco ). The tax structures at the time of the surveys in the countries analyzed here include: simple uniform structures that apply the same specific or ad valorem tax to all cigarette brands and more complex systems that apply a combination of specific and ad valorem excises or tiered excises. In addition to the excise taxes, many of these countries levy value added or other taxes on cigarettes (e.g., sales taxes applied by state/local governments in the United States). With respect to excises, the following systems are applied:

1. Uniform specific tax: the United States was the only country that applied a uniform specific excise tax to all cigarette brands, at a rate of $1.0067 per pack applied at the national level. In addition to the national-level tax, all state and many local governments levy uniform specific excise taxes on cigarettes. The average state and federal excise taxes amounted to about 44% of average cigarette prices at the time of the survey ( Orzechowski and Walker, 2012 ).

2. Uniform ad valorem tax: at the time of the surveys, Mexico, Thailand, Uruguay, and Vietnam applied uniform ad valorem excise taxes. In Mexico, the tax rate was 160% of wholesale price, or roughly 48% of retail price ( Waters, Sáenz de Miera, Ross, & Shigematsu, 2010 ). In Thailand, the rate was 85% of ex-factory price, which amounted to about 57%–62% of retail prices for popular brands ( Eriksen, Mackay, & Ross, 2012 ; WHO, 2009 ). In Uruguay, the tax was 70% of the “reference” price, amounting to roughly 48%–54% of retail cigarette prices ( Eriksen et al., 2012 ; WHO, 2009 ). Finally, in Vietnam, the tax was 65% of the ex-factory price, amounting to about 36% of retail prices ( Guindon et al., 2010 ; WHO, 2009 ).

3. Combination of specific and ad valorem taxes: Poland and Romania, as EU member states, applied a combination of uniform specific and uniform ad valorem excise taxes, according to the EU cigarette tax directive. In Poland, the specific component of the tax was 2.77 zlotys per pack, while the ad varolem rate was 31.41% of retail price; in Romania, these were 4.372 leu per pack and 21% of retail price. In addition, a minimum tax is applied to cigarettes in all EU countries when the combination of the specific and ad valorem taxes do not reach the minimum specified level. In Poland, this was a minimum of 4.576 zlotys per pack; in Romania, the minimum was 6.81 leu per pack. At the time of the surveys, taxes accounted for about 65% of retail price in Poland in 2009 ( Ciecierski, Cherukupalli, & Weresa, 2011 ) and 58%–62% of retail price in Romania ( Eriksen et al., 2012 ; WHO, 2009 ).

4. Tiered specific taxes: Egypt, India, the Philippines, and Ukraine applied tiered specific excise taxes. In Egypt, an eight-tiered tax system was used, with taxes ranging from 108 piasters per pack for the lowest priced cigarettes (those with net-of-tax prices below 65 piasters per pack) to 352 piasters per pack for the most expensive (those with prices more than 425 piasters per pack) ( Hanafy et al., 2010 ). Additional specific taxes were applied in Egypt, with a 10 piaster per pack tax applied to all cigarettes, with revenues earmarked for student medical insurance, and a 4 piaster per pack “manufacturing and printing” tax on locally produced foreign brands ( Hanafy et al., 2010 ). Under the complicated multitier structure, excise taxes accounted for 38%–55% of prices, depending on the brand, with the tax burden falling for higher priced brands ( Hanafy et al., 2010 ). India’s tiered specific tax structure was more complicated, with different taxes applied based on length and presence/absence of a filter. At the low end, cigarettes less than 60mm in length, with or without a filter, were taxed at 13.38 rupees per pack. At the high end, filtered cigarettes greater than 85mm in length were taxed at 47.26 rupees per pack. On average, cigarette excise taxes accounted for less than one third of retail cigarette prices ( John et al., 2010 ). In the Philippines, a multitiered specific tax structure was employed, with taxes varying based on whether cigarettes were hand or machine packed and, for machine packed, by “net retail price.” In 2009, taxes on machine-packed cigarettes ranged from 2.47 pesos per pack for cigarettes with net retail prices below 1 peso, up to 27.16 pesos per pack for those with net retail prices above 10 pesos per pack ( Quimbo et al., 2012 ). The Philippines system was further complicated by its “price classification freeze,” which used “net retail price” in 1996 to determine which tax was applied to brands that were on the market in 1996, and current “net retail price” to set the tax for brands introduced after 1996. As a result of this complicated tax system, cigarette excise taxes in the Philippines accounted for less than one quarter of retail price, on average ( Quimbo et al., 2012 ). In Ukraine, specific taxes of 0.806 and 1.8 hryvnia per pack were applied to unfiltered and filtered cigarettes, respectively; in addition, an import duty of 0.33 hryvnia per pack was applied to all imported cigarettes ( Euromonitor International, 2013 ).

5. Tiered ad valorem taxes: In Bangladesh, a four-tiered ad valorem excise tax system was used, with taxes based on “maximum retail prices” and ranging from 32% of price for the lowest tier to 57% of price for the highest tier, with rates of 52% and 55% applied to the middle tiers ( Barkat et al., 2012 ). As a result, the excise tax accounted for about half of retail cigarette prices in Bangladesh ( Barkat et al., 2012 ).

6. Tiered, mixed specific and ad valorem taxes: In the remaining two countries, China and the Russian Federation, mixed specific and ad valorem tax structures were used. In China, a small specific tax of 0.06 RMB per pack was applied to all brands. The ad valorem tax rates were 36% and 56% of the “allocation price,” where the allocation price is the price negotiated between the state cigarette monopoly and tax authorities ( Gao, Zheng, & Hu, 2012 ). As a result, the allocation price is not directly related to either the producer price or the retail price. Further complicating the situation in China is that the retail prices are not set by market forces but are instead determined jointly by the cigarette factories, cigarette companies, and tobacco monopoly authority ( Gao et al., 2012 ). In 2010, WHO (2011) estimated that the excise tax was 26% of the retail price for the most population brand of cigarettes in China. The Russian Federation applied a uniform ad valorem rate of 6% of maximum retail price while levying specific rates of 1.44 and 3 rubles per pack on unfiltered and filtered cigarettes, respectively ( Euromonitor International, 2013 ).

As the discussion above illustrates, the 14 countries used in this analysis employ diverse tax structures that are likely to have important implications for the distribution of cigarette prices in each country. This is illustrated by the summary data contained in Table 1 . In order to compare the impact of tax structure on cigarette prices across countries, brand-specific prices per pack of 20 cigarettes were constructed from the survey data for brands smoked by at least 0.5% of smokers. Prices were then normalized to the simple mean price of these brands; that is, for each brand, the resulting measure reflects the average price reported by smokers for that brand relative to the average of the brand-specific average prices.

Normalized Cigarette Prices, Descriptive Statistics

Note. GATS = Global Adult Tobacco Survey; NATS = National Adult Tobacco Survey. Brand-level data for all brands with market share of at least 0.5%, normalized based on simple average of brand-specific prices. Prevalence data reflect adult cigarette smoking prevalence from the NATS for the United States and from the GATS for other countries. Prevalence data in parentheses reflect adult bidi smoking prevalence in Bangladesh and India from the GATS.

Sources: Giovino et al. (2012) , King, Dube, and Tynan (2012) , and GATS country reports.

Table 1 presents the median, SD , skewness, minimum, and maximum values of the resulting price distribution for each country, along with the ratio of the maximum to the minimum and the tax structure in the country. In countries where prices are relatively tightly distributed, the median is expected to be near the mean (one for the normalized prices used in Table 1 ), and the SD is expected to be low. Similarly, the minimum and maximum prices will not be far from the mean, and the ratio of the maximum to minimum price is expected to be relatively low. For comparison purposes, Table 1 also includes the adult cigarette smoking prevalence rate in each country, as well as the prevalence of bidi smoking in Bangladesh and India.

There is relatively limited variation in prices in 3 of the 14 countries—Poland, Romania, and the United States. This was expected for the United States given that it is the only one of the analyzed countries with a minimum specific tax on cigarettes. However, in both Poland and Romania, taxes on virtually all brands reported in GATS were at the mandatory minimum level, so while both used a mixed system in theory, the minimum tax has the same impact on the distribution of prices as a uniform specific tax, keeping the price distribution relatively tight and minimizing differences in prices across brands.

At the other end of the spectrum, there is considerable variation in cigarette prices in Bangladesh, China, the Russian Federation, and the Philippines. In Bangladesh and China, the price distributions are highly skewed; the highest priced brand is much more expensive than the lowest priced brand (10.3 times in Bangladesh and 8.5 times in China); and the median is well below the mean, with many low-priced brands consumed by smokers in both countries. These price distributions are as expected, given the tiered ad valorem taxes in both countries that set relatively low rates on low-priced brands and higher rates on high-priced brands (in addition to the very small specific tax in China). Similarly, the wide range of prices in the Philippines results from the tiered specific tax system in place in the country, combined with the price classification freeze that sets artificially low taxes on long-standing brands. In the Russian Federation, where there is a differential specific tax based on presence or absence of a filter, along with a uniform ad valorem tax, prices are also quite variable. About one sixth of cigarettes consumed in Russia are unfiltered, a relatively high share compared with most other countries and likely to be at least in part due to the price gaps that result from the differential taxation.

The remaining countries—Egypt, India, Mexico, Thailand, Ukraine, Uruguay, and Vietnam, fall in between the countries at the two ends of the distribution. These countries use ad valorem taxes or tiered specific taxes that are similar in many ways to an ad valorem tax in that the specific tax generally rises with prices. The distributions of prices in these countries are wider than those that use uniform specific taxes (like the United States) or that use mixed systems with a minimum floor (like Poland and Romania), but are not as wide as in countries that use more complicated structures that include tiered ad valorem taxes. Differences in the variability in prices between these countries is likely to reflect the level of the ad valorem tax (or the extent to which the tiered specific taxes increase proportionally to price), with greater variability expected in countries with higher ad valorem tax rates (or tiered specific taxes that increase more than in proportion to price from one tier to the next), and vice versa. For example, in Egypt, while there is an eight-tiered specific tax structure, the taxes do not rise in proportion to price, so that the tax burden is lower on higher priced brands, producing a relatively narrow price distribution compared with some of the countries with uniform ad valorem tax structures. At the same time, factors other than tax structure appear to be important contributors to the cigarette price distribution in these countries. In Vietnam, for example, there is a relatively wide variation in prices and the median price is well below the mean. This may, at least in part, result from the availability of relatively high-priced international cigarette brands that have been smuggled into Vietnam, given that these brands are not produced by the domestic monopoly ( Joossens, 2003 ). The opposite appears to be the case in Uruguay, where there are a number of low-priced brands that add to the variability in prices, at least partially the result of cigarettes being smuggled into Uruguay to evade the relatively high local taxes.

Similar patterns are observed when the analysis is limited to a subset of the most widely consumed brands in each country. Figure 1 presents the normalized price data for the five leading brands in each country. Again, countries with relatively simple tax structures, particularly uniform specific or mixed systems with a minimum floor, have less variation in prices among leading brands, while those with more complicated tiered structures, particularly those that include tiered ad valorem taxes, have much greater variation in prices.

Normalized cigarette prices, top five brands. ( Note: Normalized brand prices are the ratios of the average price reported by smokers for each brand relative to the average of the brand-specific average prices).

While significant cigarette tax increases are highly effective in reducing smoking and its consequences ( IARC, 2011 ), the widespread availability of lower cost brands can lead some smokers to switch to cheaper brands in order to continue smoking or maintain consumption and may remain affordable for young people who are considering taking up smoking. Opportunities for this type of “switching down” are increased when there is greater variability in the prices of cigarettes available in the market. As the data shown above demonstrate, more complicated cigarette tax structures result in greater variability in cigarette prices.

This analysis is subject to several limitations. First, the prices reported in the GATS and NATS reflect the prices of brands consumed by smokers in the surveys and may not capture the full range of prices for cigarettes available in the market. At the same time, they may capture untaxed, smuggled cigarettes, increasing the variability in the reported prices. Second, these are self-reported prices and may be subject to some reporting errors, and may include temporary price promotions, both potentially adding to the variability in reported prices. Third, the descriptive analysis presented above does not quantify the relationship between tax structure and the distribution of cigarette prices, given the challenges associated with constructing measures that fully capture the complexities of the tax structures used in the countries analyzed. Finally, this paper focuses only on cigarette tax structure; differences in tax levels and structures for other tobacco products can lead to substitution between tobacco products in response to cigarette and other tobacco tax increases.

Despite these limitations, the findings in this paper are consistent with expectations and economic theory, with simpler cigarette tax structures, particularly those emphasizing specific taxes, resulting in less variability in the prices smokers pay for cigarettes. This suggests that increases in cigarette taxes in countries with simpler tax structures will be more effective in reducing cigarette smoking and its health and economic consequences than will comparable tax increases in countries where tax structures are more complicated and there are greater opportunities for switching to cheaper brands in order to avoid a tax increase. This lends further support to the WHO’s “best practices” of employing a simple tax structures that emphasize specific taxes and comparable taxes on all tobacco products in order to most effectively use tobacco tax increases to achieve public health goals ( WHO, 2010 ). Indeed, among the countries analyzed in this paper, Egypt and the Philippines have recently taken steps in this direction. Egypt moved from its eight-tiered specific tax structure to a mixed system with a significant specific component (E£ 1.25 per pack) in July 2010. In late 2012, the Philippines adopted legislation that eliminates the artificial price classification freeze, reduces the number of tiers to two in the short run, and eventually achieves a high uniform specific tax in 2017. These are evidence-based fiscal policy options that countries can use to progress toward reducing tobacco use.

Funding for the Global Adult Tobacco Survey (GATS) is provided by the Bloomberg Initiative to Reduce Tobacco Use, a program of Bloomberg Philanthropies. Governments of Brazil and India contributed to GATS implementation in their respective countries. The Bill and Melinda Gates Foundation provided additional funding for GATS implementation in China and for analysis.

The conclusions in this paper are those of the authors and do not necessarily represent the official position of their affiliated organizations. .

The authors would like to thank Linda Andes and Erin O’Connor for valuable data assistance.

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Psychological Health and Smoking in Young Adulthood: Smoking Trajectories and Responsiveness to State Cigarette Excise Taxes

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• March 19, 2019
• Affiliation: Gillings School of Global Public Health, Department of Health Behavior
• While smoking rates have significantly decreased among the general population in the past several decades, they have not significantly decreased among those with poorer psychological health. As posited by theories such as the Transactional Model of Stress and Coping, smoking may represent an important coping mechanism for individuals who experience stress or unpleasant feelings related to poorer psychological health. If poorer psychological health is experienced during young adulthood, a critical time for tobacco use experimentation and uptake, individuals may be particularly likely to become dependent on nicotine and develop longer term smoking habits. In addition, tobacco control policies that have reduced tobacco use in the general population, like raising the price of cigarettes, may be less effective among people with poorer psychological health. Using two indicators of psychological health, a continuum of psychological distress and ever diagnosis of a mental illness, this dissertation explored first, how psychological health accounts for variability within and between individuals in trajectories of smoking (status and amount) across the ages of 18 to 30, and second, whether psychological health moderates the effectiveness of cigarette excise taxes in preventing and reducing smoking. Using a longitudinal national sample across years 2007 to 2013, between-individual effects were found such that individuals with poorer psychological health were more likely to be smokers and to smoke greater numbers of cigarettes over young adulthood than those with better psychological health (Aim 1 and Aim 2). Additionally, the positive effect of having a diagnosed mental illness on smoking amount increased with age, suggesting older young adults may be important targets for intervention (Aim 1). While the effect of cigarette excise taxes encouragingly was not shown to differ by psychological health, cigarette excise taxes showed little effect on smoking at all, perhaps suggesting taxes need to be raised higher than they have been to meaningfully impact smoking (Aim 2). Interventions should aim to target high-risk young adults with poorer psychological health to treat unpleasant psychological symptoms simultaneously with smoking prevention and cessation programs. Overall, this work helps us understand the relationships between psychological health, smoking, and tobacco control policy, with implications for interventions.
• psychological distress
• mental health
• Health sciences
• Mental health
• tobacco control
• public health
• young adults
• https://doi.org/10.17615/ef4w-5738
• Dissertation
• In Copyright
• Ribisl, Kurt
• Ennett, Susan
• Gottfredson, Nisha
• Golden, Shelley
• Aiello, Allison
• Doctor of Philosophy
• University of North Carolina at Chapel Hill Graduate School

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The effects of tobacco taxation and pricing on the prevalence of smoking in Africa

• Mustapha Immurana   ORCID: orcid.org/0000-0001-5711-7566 1 ,
• Micheal Kofi Boachie 2 &
• Abdul-Aziz Iddrisu 3  

Global Health Research and Policy volume  6 , Article number:  14 ( 2021 ) Cite this article

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Tobacco use continues to kill millions of people globally, making it one of the major causes of preventable deaths. Notwithstanding, there has been a very marginal fall in the prevalence of tobacco smoking in Africa. Since taxes (hence prices) are part of the main measures suggested to decrease the demand for tobacco products, this study investigates how tobacco taxation and pricing influence the prevalence of smoking in 24 African countries.

Using panel data on 24 African countries sourced from the World Health Organization (WHO) and the World Bank databases for the period 2010 to 2016, this study employs the system Generalized Method of Moments (GMM) estimator to investigate the effects of tobacco taxation and pricing on the prevalence of smoking. The system GMM estimator is used due its ability to deal with potential endogeneity of tobacco taxation and pricing: the likelihood that the prevalence of smoking can influence tobacco taxation and pricing which may lead to biased estimates.

Tobacco taxation and pricing have negative significant effects on the prevalence of smoking among the selected countries after controlling for growth of Gross Domestic Product (GDP) per capita, urbanization, death rate and net inflows of Foreign Direct Investment (FDI). Specifically, a percentage increase in tobacco price is found to decrease the prevalence of smoking by between 0.11 to 0.14%, while a percentage increase in tobacco tax decreases the prevalence of smoking by between 0.25 to 0.36%, all at 1% level of significance.

Since tobacco taxation and pricing are found to have negative significant effects on the prevalence of smoking, the implication is that, their use can be intensified by African policy makers towards achieving the WHO Framework Convention on Tobacco Control (FCTC) recommended targets and hence decrease the prevalence of tobacco smoking in Africa. Doing so may therefore help in achieving the Sustainable Development Goal (SDG) 3.5 (prevention and treatment of substance abuse), thereby reducing the colossal number of smoking attributable deaths.

Morbidity and mortality resulting from tobacco use, although avoidable, remain high globally. It is estimated that, annually, lives lost to tobacco use surpasses eight (8) million worldwide [ 1 ]. Notwithstanding, about 1.3 billion people use tobacco, and a significant percentage of these people live in low- and middle-income countries [ 1 , 2 ]. For the African region, it poses even a greater risk of tobacco use and related deaths in the future. This is evidenced in the rising number of people who use or smoke tobacco products. For example, 64 million (49 million), 65 million (51 million), 68 million (54 million) and 71 million (57 million) people were found to be using (smoking) tobacco in Africa in 2000, 2005, 2010 and 2015 respectively, while projections show that these figures would increase to 80 million (67 million) by the end of 2025. Footnote 1 Thus, the African region remains part of the only three regions (including South-East Asia and Eastern Mediterranean regions) in which the number of tobacco smokers has been growing consistently. Moreover, the prevalence of current tobacco smoking in the African region has been declining only marginally (from 14.2% in 2000 to 10.8% in 2015). It is therefore, not surprising that, as of 2018, only eight African countries were likely to meet the World Health Organization (WHO) target of 30% relative reduction in the prevalence of tobacco use by 2025 (using 2010 as the reference year) [ 2 ]. The above situation has serious implications on productivity and healthcare systems, given that many non-communicable diseases are caused by tobacco use [ 3 ].

The staggering number of smokers and the associated deleterious effects have attracted attention from both academic and policy circles. Article 6 of the WHO Framework Convention on Tobacco Control (FCTC) recommends governments to use tax and price measures to control tobacco consumption [ 4 ]. By raising excise tax rates and/or imposing new ones, prices of tobacco products (all else being equal) would rise [ 5 ]. This makes smoking cost-prohibitive; deters potential smokers; and encourages cessation as well as engender a cutback in the quantum consumed by current smokers [ 5 – 8 ].

Whether the strategy of using tax and price measures to curb smoking yields the desired results, is an empirical question that has received considerable attention in the literature [ 7 – 16 ]. Among these studies, only Ho et al. [ 11 ] conducted a cross-country analysis for Africa, and found cigarette prices to decrease cigarette consumption. However, a common limitation in many of these studies is the use of techniques that fail to address the potential endogeneity of tax or price: the likelihood that smoking or using tobacco products may also influence tobacco taxes or prices. As a result, many of the estimates in these studies may be essentially biased.

Although some studies [ 11 , 16 ] addressed the potential endogeneity of prices, the authors (like most of the other empirical studies) considered the effect of price on quantity of tobacco products ( cigarette in the case of these studies ) consumed or smoked and not the prevalence of tobacco use or smoking. While the quantity consumed informs us about the amount of tobacco products consumed in a period, it does not reveal the percentage of the population involved (i.e., participation). However, the prevalence measure of tobacco use reveals the percentage of the population who use tobacco products. This measure gives a broader understanding of the proportion of the population that is at risk of developing smoking-related diseases and premature deaths [ 17 ]. Therefore, reducing prevalence has more public health benefits. In addition, the prevalence measure is more useful for time series or cross-country analysis since data on prevalence of smoking is more readily available relative to the quantity smoked [ 18 ]. Further, many of the studies conducted their analyses for only cigarettes. However, tobacco products such as shisha and cigar are also used in Africa.

This study, therefore, investigates the effects of tobacco taxation and pricing on the prevalence of smoking in 24 selected African countries. The study makes a significant contribution to this strand of the literature generally and the African context in particular. We deal with the endogeneity problem by using the system Generalized Method of Moments (GMM) estimator, and consider the prevalence of tobacco smoking as opposed to cigarette smoking ( focusing on only quantity ). Doing so reveals results that are robust and unbiased, which can be employed in the African context for effective policymaking as regards using taxes and prices to control tobacco use.

Data sources

This study uses data from 2010 to 2016 Footnote 2 on 24 African countries (see Table 7 in Appendix ). Data on tobacco tax and price are obtained from the WHO [ 19 ], while data on all the remaining variables are from the World Bank [ 20 ]. The number of countries and the study duration are mainly determined by data availability, especially regarding tobacco tax and price as well as the prevalence of smoking.

The dependent variable is the prevalence of smoking (Smoking) and the main independent variables are tobacco tax (Tax) and price (Price). The control variables used are growth rate of Gross Domestic Product (GDP) per capita (GDP per cap.), urban population growth rate (Urbanization), death rate (Death rate) and Foreign Direct Investment (FDI).

Tobacco tax refers to the total tax on a pack of 20 cigarettes. This tax includes import duties, excise taxes, Value Added Tax (VAT) and other applicable taxes expressed as a percentage of the retail price of the most sold brand. Price of tobacco refers to the retail price of a pack of 20 of the most sold brand of cigarette in international dollars (at Purchasing Power Parity (PPP)) [ 19 ]. We use cigarette taxes and prices to proxy taxes and prices for all tobacco products because of data unavailability pertaining to taxes and prices for all other tobacco products. Moreover, cigarettes are the most used tobacco products [ 21 ].

Death rate is measured per 1000 people. Smoking prevalence is measured as the percentage of population (≥ 15 years) who currently smoke any tobacco product (excluding the use of smokeless tobacco), whether on daily or non-daily basis in a year. Growth of GDP per capita is measured by the yearly growth rate of GDP divided by (midyear) population, measured in percentages. Urbanization refers to the growth rate of the number of people living in urban areas on an annual basis, measured in percentages. FDI is measured by investment (the net inflows) to obtain a permanent managerial interest (voting stock of ≥10%) in a country that differs from the investor’s country, expressed as a percentage of GDP [ 20 ].

Regarding the expected signs of the explanatory variables, based on the theory of demand, it is expected that both tobacco price and tax will have negative effects on the prevalence of smoking. This is because rising taxes would increase the prices of tobacco products and hence decrease the amount of tobacco that people can smoke as well as the number of people who take up smoking or raise the number of quitters, ceteris paribus [ 6 ]. The sign of GDP per capita may be negative or positive depending on whether tobacco is a normal good or an inferior good. If tobacco is a normal good, an increase in income is expected to increase the prevalence of smoking, while prevalence of smoking will decline if tobacco is an inferior good. Urbanization is expected to have a positive effect on the prevalence of smoking [see 22 – 24 ], because it can serve as a good market for tobacco firms. Also, rural dwellers who travel to urban areas as part of urbanization may give up some cultural norms (which view smoking to be a deviant behavior) associated with rural areas to adopt smoking, which is seen as a typical urban lifestyle. We expect death rate to have a negative effect on the prevalence of smoking because rising mortalities (especially preventable deaths) may force people to adopt healthy behaviors such as quitting smoking. FDI is expected to have a positive effect on the prevalence of smoking because more FDI inflows may be associated with increased production and consumption of tobacco [ 25 ].

Empirical model

Equation 1 is used to estimate the effects of tobacco tax and price on the prevalence of smoking:

where T is a vector of tobacco tax and price, X indicates a set of control variables, i represents country, t represents time and μ indicates the error term. Smoking is as already defined.

Equation 1 is re-specified more formally by including the first lag of the dependent variable (to take care of the persistence as well as the initial level of prevalence of smoking) and time fixed effects as follows:

where α 0 is the intercept of the regression equation, the remaining α s are coefficients of their respective variables, Smoking it−1 is the first lag of the prevalence of smoking, and Ω t represents time fixed effects (year dummies).

Data analysis

In estimating Eq. 2 , one major challenge is the possibility of endogeneity. First, there is the possibility of smoking prevalence (dependent variable) influencing right hand side variables (independent or explanatory variables) such as tobacco tax, tobacco price and death rate. For instance, high smoking prevalence may push governments to increase excise taxes and/or impose new ones which in turn raises prices of tobacco, in order to decrease tobacco consumption (participation and intensity). Moreover, rising prevalence of smoking may increase future deaths rates. Second, the inclusion of the first lag of the prevalence of smoking in Eq. 2 may lead to endogeneity because it may correlate with the error term [ 26 – 28 ]. If these endogeneity concerns are not addressed, they may lead to biased and unreliable estimates, since the coefficients of the independent or explanatory variables may not be true reflections of their effects on the dependent variable. Given the above, this study uses the system GMM estimator by Arellano and Bover [ 29 ] and Blundell and Bond [ 30 ] as the empirical data analysis technique. The system GMM estimator addresses endogeneity by using first differenced and level regressions as well as lags of the explanatory variables as instruments. The system GMM therefore provides a means of using the second-order serial correlation and Hansen overidentification tests to verify the validity of the instruments used. Moreover, the system GMM is more suitable for datasets with many cross-sections but few time periods [ 27 ], as is the case in this study.

Descriptive statistics

In this sub-section, we present the average smoking prevalence, tobacco taxes and prices for the selected countries (see Table  1 ). Changes in smoking prevalence, tobacco taxes and prices between 2010 and 2016 (see Table  2 ) as well as summary of the variables (see Table  3 ) are also presented.

From Table 1 , it is evident among the selected countries that Seychelles (22.214%), Mauritius (22.171%), Namibia (21.443%), South Africa (20.657%), Republic of the Congo (20.229%) and Botswana (19.743%) are the six countries with the highest smoking prevalence rates over the sampled period. With regard to tobacco taxation, Mauritius (72.059%), Seychelles (71.465%), Kenya (52.746%), Botswana (52.494%), South Africa (49.567%) and Algeria (48.703%) are the six countries with the highest tobacco taxes. Also, Seychelles (11.276), Mauritius (6.745), Botswana (6.739), Namibia (6.427), South Africa (5.725) and Cape Verde (3.794) are the six countries with the highest tobacco prices (in international dollars at PPP).

Thus, Mauritius, Seychelles, Botswana and South Africa being among the top countries with high tobacco taxation and pricing is understandable given that they are part of the countries with the highest prevalence of smoking. The implication is that these taxes and prices might have been raised in order to reduce the relatively high prevalence of smoking in these countries.

Also, Ghana (4.157%) and Ethiopia (4.429%) are the two countries with the lowest smoking prevalence. Further information on the prevalence of smoking, taxation and pricing can be seen in Table 1 .

From Table 2 , it can be seen that while the prevalence of smoking in countries such as Algeria, Botswana and Republic of the Congo increased between 2010 and 2016, most of the countries experienced decreasing prevalence of smoking, though very marginal. Also, all the countries in the sample (except Benin, Kenya, Nigeria and Rwanda) experienced increases in tobacco prices. Therefore, it is worth investigating whether tobacco prices have played any role in the marginal reduction in the prevalence of smoking experienced in most of the countries.

In Table 3 , the summary statistics of the variables used in the study are presented. It can be seen that the prevalence of smoking, tobacco price, tobacco tax, growth rate of GDP per capita, urban population growth, death rate and FDI net inflows as a percentage of GDP have mean values of 13.42%, Int. US$3.47, 37.41%, 2.67, 3.57%, 8.58 per 1000 people and 5.29% respectively. Thus from 2010 to 2016, 13.42% of the population (≥ 15 years) in the selected countries smoked tobacco. This calls for the use of mechanisms such as taxation and pricing to reduce the number of people using tobacco products. Notwithstanding, the average overall tax of 37.41% is far less than the WHO recommended level of more than 75% [ 21 ], hence making it worrying regarding the fight against the use of tobacco products in Africa.

Correlation analyses of prevalence of smoking, tobacco price, tobacco tax and control variables

In this sub-section, the correlation analyses of variables (see Table  4 ) are presented.

In Table 4 , the correlation matrices between both tobacco tax and price, and smoking prevalence are not less than 0.6 which show the strength of relationships between these variables and hence the need for further analysis using a multivariate approach. Moreover, the correlation matrices among the independent variables are low Footnote 3 which indicate the less likelihood of  multicollinearity.

Results of the effects of tobacco tax, tobacco price and control variables on smoking prevalence

This section presents results of the system GMM regressions on the effects of tobacco tax and price on smoking prevalence in the 24 selected African countries (Tables 5 and 6 ). It should be noted that in all estimations, the standard errors are robust to heteroscedasticity and autocorrelation. Moreover, the second-order serial correlation tests (AR (2)) and the Hansen overidentification tests show the absence of second-order serial correlation and overidentification respectively, hence, confirming the appropriateness of the instruments used. Also, the overall p -values of all our regression results are statistically significant at 1%. These tend to affirm the efficiency and unbiasedness of our results as well as their implications.

In Table  5 where the effect of tobacco prices on the prevalence of smoking is examined, as expected, the lag of the dependent variable is statistically significant. Regarding price, we find that it has a negative significant effect in all the models. Specifically, price is found to have coefficients of − 0.43, − 0.44 and − 0.52 in Models 1, 2 and 3 respectively. These coefficients are all significant at 1%. Thus, a unit increase in the price of tobacco products is found to decrease the prevalence of smoking by 0.43, 0.44 and 0.52 percentage points in Models 1, 2 and 3 respectively. Using elasticities, Footnote 4 a percentage increase in price decreases the prevalence of smoking by 0.11% in Models 1 and 2 and by 0.14% in Model 3. Further, urbanization is found to have a positive significant effect on the prevalence of smoking in Model 3. Specifically, a unit increase in urban population growth is found to increase smoking prevalence by 0.39 percentage points in Model 3 at 10% level of significance.

In Table  6 , we present the results of the effect of tobacco taxation on the prevalence of smoking tobacco. As anticipated, we find the lag of the dependent variable to be significant in all models. Also, the coefficient of tax is negatively significant in all the models. Specifically, tobacco taxation is found to have respective coefficients of − 0.09 (Models 1 and 2) and − 0.13 (Model 3) that are significant at 1%. The implication is that, a unit increase in tobacco tax decreases the prevalence of smoking by 0.09 percentage points in Models 1 and 2, as well as by 0.13 percentage points in Model 3. Interpreting the tax coefficients as elasticities, we find that a percentage increase in tax decreases the prevalence of smoking by 0.25% in Models 1 and 2 and by 0.36% in Model 3.

As regards the control variables, GDP per capita is found to have positive coefficients of 0.08, 0.07 and 0.11. These coefficients are statistically significant at 10, 1 and 5% in Models 1, 2 and 3 respectively. Thus, a unit increase in GDP per capita is found to increase smoking prevalence by 0.08, 0.07 and 0.11 percentage points in Models 1, 2 and 3 respectively. Moreover, death rate is found to have a coefficient of − 0.42 in Model 3, which is significant at 5%. Thus, a unit increase in death rate decreases smoking prevalence by 0.42 percentage points.

Effects of tobacco tax and price on the prevalence of smoking

The findings of the current study are in line with the existing literature. As regards the price of tobacco, its finding of decreasing the prevalence of smoking in all the models is not surprising since higher prices can make tobacco products cost-prohibitive which will deter or reduce smoking [ 5 , 6 , 7 , 8 ]. Previous studies have found results similar to this [ 7 , 11 , 16 ]. In South Africa, hikes in cigarette prices resulting from excise tax increases led to a significant decline in cigarette consumption [ 31 ]. Consistent with the literature [ 6 ], the demand for tobacco products is price inelastic since all the coefficients are less than one. This can be attributed to the addictive nature of tobacco use such that, even in the presence of a price increment, some people would still be willing to smoke. The implication is that, price increments should be very high in order to make a significant reduction in the prevalence of smoking. Moreover, other measures such as banning tobacco advertising and smoking in public as well as creating awareness of the harmful effects of tobacco, could complement tobacco tax in the attempt to combat smoking. This is because it has been found that, exposure to legacy, state-sponsored as well as pharmaceutical advertisement was associated with less smoking in the United States [ 32 ], whiles a ban on tobacco advertising or promotion was found to reduce awareness of tobacco promotions in the United Kingdom [ 33 ]. Also, findings from 22 Organization for Economic Co-operation and Development [OECD] countries showed that using a set of comprehensive bans on tobacco advertising can decrease the consumption of tobacco [ 34 ]. Further, in Bangladesh, a ban on indoor smoking at worksites was found to enhance the likelihood of quitting smoking [ 35 ].

Similar to price, the finding that tobacco taxation reduces the prevalence of smoking is not farfetched because, an increase in tax would make tobacco products expensive through its effect on price [ 5 ]. This finding buttresses the conclusion that taxes are potent in decreasing the consumption of tobacco among low-income groups of which Africa is not an exception [ 6 , 21 ]. Similarly, Levy et al. [ 10 ] and Sharbaugh et al. [ 12 ] found a rise in tax to decrease the prevalence of smoking in Taiwan and the United States respectively.

Effect of GDP per capita on the prevalence of smoking

With regard to income, we find that an increase in GDP per capita increases the prevalence of smoking (Table 6 ). This is because as people’s incomes increase, they are more capable of affording other products (such as tobacco) beyond the basic necessities of life. The results show that tobacco is a normal good and that growing income makes it more affordable. This finding is in tandem with previous studies that found rising incomes to influence tobacco consumption positively [ 9 , 15 ]. Given the continent’s (Africa) impressive growth performance for some time now, the current smoking prevalence in Africa is unlikely to fall substantially, if efforts are not bolstered. For instance, between 2002 and 2008, the average economic growth rate for Africa was roughly 5.6% [ 36 ]. In 2013, Africa’s economic growth rate of 3.7% exceeded the global economic growth rate of 2.4%. The same can be said for the year 2014 [ 37 ]. It is therefore not surprising that Blecher and Ross [ 18 ] posit that increasing economic growth has increased the number of smokers as well as the quantity of cigarettes smoked in Africa.

Effect of urbanization on the prevalence of smoking

The findings show that, the prevalence of smoking increases when urban population grows. This outcome is not surprising since rising urban population may be seen by the tobacco industry as a potential market for tobacco trade, hence, would be attracted to these urban centers. Moreover, people from rural areas who travel to urban areas as part of urbanization may adopt lifestyles such as smoking that are more typical of urban areas relative to rural areas, which may increase the prevalence of smoking. This finding can be related to previous studies that found rising rural population to decrease the consumption of cigarette among a sample of African countries [ 11 ], as well as moderate and high urbanization (urbanicity) increasing smoking attitude among black women in South Africa [ 22 ]. Also, it has been found that urban females have five times higher smoking prevalence than their rural counterparts in Thailand [ 23 ], while students from urban settings were more likely to initiate smoking relative to those from rural settings in Thailand [ 24 ]. These findings provide signals with regard to the need to pay critical attention to urban areas concerning policies aimed at reducing the consumption of tobacco.

Effects of FDI and death rate on the prevalence of smoking

FDI is found to have a negative but insignificant effect on the prevalence of smoking. This conflicts the finding of Gilmore and McKee [ 25 ] who found FDI to increase the production and consumption of tobacco. Our finding can be attributed to the fact that in recent times, FDI inflows into Africa are more concentrated in the services sector relative to the manufacturing sector [ 38 ]. Moreover, the negative sign of FDI (though insignificant) can be related to Immurana [ 39 ] who found FDI to improve health in Africa.

Also, as expected, death rate is found to decrease the prevalence of smoking. This is not farfetched since rising death rate may force people to adopt healthy lifestyles such as avoiding smoking. In fact, information on smoking-attributed deaths may induce behavioral change among the population.

Limitations

The study is not without limitations. In examining the effects of taxes and prices on tobacco smoking prevalence, the ideal situation would have been to use taxes and prices for all tobacco products instead of cigarette prices and taxes. Moreover, our study is restricted to a sample of 24 African countries and hence may be limited in terms of generalizing the findings to represent the African continent, given that there are more than 50 countries on the continent. Also, tax and price measures are just some of the many tobacco control measures. For instance, restrictions on smoking in public places and sale to minors; public health campaigns on smoking, comprehensive bans on promotion and advertising; and health warning labels may also help to control tobacco use. It would have therefore been useful if the study examined such policies to find the extent to which they decrease the prevalence of smoking.

This study examines the effects of tobacco taxation and pricing on the prevalence of smoking in 24 African countries for the period, 2010–2016, while controlling for per capita income, urbanization, death rate and FDI. The system GMM estimator is used as the empirical data analysis technique. We find that while rising per capita income and urbanization have positive significant effects on the prevalence of smoking, the effect of death rate is negatively significant. Notwithstanding, it must be noted that these control variables were only significant in some of the models. With regard to tobacco taxes and prices, we find that they have negative significant effects (at 1% level) on the prevalence of smoking, even after robustness checks. The implication is that, tobacco taxation and pricing help in decreasing the prevalence of smoking in Africa. This buttresses the point by the WHO that tobacco tax and price measures are effective tools in reducing the prevalence of smoking. The findings call for African governments to adhere to the WHO FCTC strategies, especially those on taxes, in order to significantly reduce the prevalence of tobacco use. Doing so would help in curbing the huge number of deaths attributed to tobacco use and hence help in achieving the Sustainable Development Goal (SDG) 3.5 (prevention and treatment of substance abuse) and to a greater extent SDG 3 (good health and wellbeing).

Availability of data and materials

The data used for the study are freely available from the websites of the World Health Organization ( https://www.who.int/tobacco/global_report/2017/appendix-ix/en/ ) and the World Bank ( https://databank.worldbank.org/source/world-development-indicators ).

The figures not in brackets represent those who use tobacco and those in the brackets represent those who smoke tobacco.

We fill gaps in the data with linear interpolation.

Apart from tobacco tax and price because they are not put together in the same model.

As suggested by a reviewer, the elasticities are obtained by multiplying the price (tax) coefficients by the ratio of the mean price (tax) to the mean smoking prevalence.

Abbreviations

Framework Convention on Tobacco Control

Foreign Direct Investment

Gross Domestic Product

Organization for Economic Co-operation and Development

Purchasing Power Parity

Sustainable Development Goal

World Health Organization

Generalized Method of Moments

Value Added Tax

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The study was conceptualized by all the authors. All the authors wrote the introductory part of the study. The methods, data gathering and analyses were done by MI. MI put together the initial version of the manuscript. MKB and A-ZI read the initial draft of the manuscript and made useful comments. The final draft was read and approved by all the authors.

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How to Write a Thesis Statement | 4 Steps & Examples

Published on January 11, 2019 by Shona McCombes . Revised on August 15, 2023 by Eoghan Ryan.

A thesis statement is a sentence that sums up the central point of your paper or essay . It usually comes near the end of your introduction .

Your thesis will look a bit different depending on the type of essay you’re writing. But the thesis statement should always clearly state the main idea you want to get across. Everything else in your essay should relate back to this idea.

You can write your thesis statement by following four simple steps:

• Start with a question
• Write your initial answer
• Develop your answer
• Refine your thesis statement

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What is a thesis statement, placement of the thesis statement, step 1: start with a question, step 2: write your initial answer, step 3: develop your answer, step 4: refine your thesis statement, types of thesis statements, other interesting articles, frequently asked questions about thesis statements.

A thesis statement summarizes the central points of your essay. It is a signpost telling the reader what the essay will argue and why.

The best thesis statements are:

• Concise: A good thesis statement is short and sweet—don’t use more words than necessary. State your point clearly and directly in one or two sentences.
• Contentious: Your thesis shouldn’t be a simple statement of fact that everyone already knows. A good thesis statement is a claim that requires further evidence or analysis to back it up.
• Coherent: Everything mentioned in your thesis statement must be supported and explained in the rest of your paper.

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The thesis statement generally appears at the end of your essay introduction or research paper introduction .

The spread of the internet has had a world-changing effect, not least on the world of education. The use of the internet in academic contexts and among young people more generally is hotly debated. For many who did not grow up with this technology, its effects seem alarming and potentially harmful. This concern, while understandable, is misguided. The negatives of internet use are outweighed by its many benefits for education: the internet facilitates easier access to information, exposure to different perspectives, and a flexible learning environment for both students and teachers.

You should come up with an initial thesis, sometimes called a working thesis , early in the writing process . As soon as you’ve decided on your essay topic , you need to work out what you want to say about it—a clear thesis will give your essay direction and structure.

You might already have a question in your assignment, but if not, try to come up with your own. What would you like to find out or decide about your topic?

For example, you might ask:

After some initial research, you can formulate a tentative answer to this question. At this stage it can be simple, and it should guide the research process and writing process .

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Now you need to consider why this is your answer and how you will convince your reader to agree with you. As you read more about your topic and begin writing, your answer should get more detailed.

In your essay about the internet and education, the thesis states your position and sketches out the key arguments you’ll use to support it.

The negatives of internet use are outweighed by its many benefits for education because it facilitates easier access to information.

In your essay about braille, the thesis statement summarizes the key historical development that you’ll explain.

The invention of braille in the 19th century transformed the lives of blind people, allowing them to participate more actively in public life.

A strong thesis statement should tell the reader:

• Why you hold this position
• What they’ll learn from your essay
• The key points of your argument or narrative

The final thesis statement doesn’t just state your position, but summarizes your overall argument or the entire topic you’re going to explain. To strengthen a weak thesis statement, it can help to consider the broader context of your topic.

These examples are more specific and show that you’ll explore your topic in depth.

Your thesis statement should match the goals of your essay, which vary depending on the type of essay you’re writing:

• In an argumentative essay , your thesis statement should take a strong position. Your aim in the essay is to convince your reader of this thesis based on evidence and logical reasoning.
• In an expository essay , you’ll aim to explain the facts of a topic or process. Your thesis statement doesn’t have to include a strong opinion in this case, but it should clearly state the central point you want to make, and mention the key elements you’ll explain.

If you want to know more about AI tools , college essays , or fallacies make sure to check out some of our other articles with explanations and examples or go directly to our tools!

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A thesis statement is a sentence that sums up the central point of your paper or essay . Everything else you write should relate to this key idea.

The thesis statement is essential in any academic essay or research paper for two main reasons:

• It gives your writing direction and focus.
• It gives the reader a concise summary of your main point.

Without a clear thesis statement, an essay can end up rambling and unfocused, leaving your reader unsure of exactly what you want to say.

Follow these four steps to come up with a thesis statement :

• Ask a question about your topic .
• Write your initial answer.
• Develop your answer by including reasons.
• Refine your answer, adding more detail and nuance.

The thesis statement should be placed at the end of your essay introduction .

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The impact of tobacco taxation on cigarette consumption: a case study of France

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This thesis investigates the relationship between tobacco taxes and the consumption of cigarettes in France. The goal of this thesis is to determine the impact of the recent successive increases in tobacco taxes on the demand for cigarettes. The basic model of “rational addiction” of Becker et al (1994) is used and modified to construct and test a new empirical model. The study is a time series analysis employing monthly data from February 2000 to December 2005. Results show that the price of cigarettes and therefore, the tobacco taxes have a significant impact on cigarette sales. The price-elasticity of demand for cigarettes in France is found to be elastic and negative, suggesting that the French government can discriminate the consumption of cigarette through an increase of tobacco taxes.

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25 Thesis Statement Examples That Will Make Writing a Breeze

Understanding what makes a good thesis statement is one of the major keys to writing a great research paper or argumentative essay. The thesis statement is where you make a claim that will guide you through your entire paper. If you find yourself struggling to make sense of your paper or your topic, then it's likely due to a weak thesis statement.

Let's take a minute to first understand what makes a solid thesis statement, and what key components you need to write one of your own.

A thesis statement always goes at the beginning of the paper. It will typically be in the first couple of paragraphs of the paper so that it can introduce the body paragraphs, which are the supporting evidence for your thesis statement.

Your thesis statement should clearly identify an argument. You need to have a statement that is not only easy to understand, but one that is debatable. What that means is that you can't just put any statement of fact and have it be your thesis. For example, everyone knows that puppies are cute . An ineffective thesis statement would be, "Puppies are adorable and everyone knows it." This isn't really something that's a debatable topic.

Something that would be more debatable would be, "A puppy's cuteness is derived from its floppy ears, small body, and playfulness." These are three things that can be debated on. Some people might think that the cutest thing about puppies is the fact that they follow you around or that they're really soft and fuzzy.

All cuteness aside, you want to make sure that your thesis statement is not only debatable, but that it also actually thoroughly answers the research question that was posed. You always want to make sure that your evidence is supporting a claim that you made (and not the other way around). This is why it's crucial to read and research about a topic first and come to a conclusion later. If you try to get your research to fit your thesis statement, then it may not work out as neatly as you think. As you learn more, you discover more (and the outcome may not be what you originally thought).

Additionally, your thesis statement shouldn't be too big or too grand. It'll be hard to cover everything in a thesis statement like, "The federal government should act now on climate change." The topic is just too large to actually say something new and meaningful. Instead, a more effective thesis statement might be, "Local governments can combat climate change by providing citizens with larger recycling bins and offering local classes about composting and conservation." This is easier to work with because it's a smaller idea, but you can also discuss the overall topic that you might be interested in, which is climate change.

So, now that we know what makes a good, solid thesis statement, you can start to write your own. If you find that you're getting stuck or you are the type of person who needs to look at examples before you start something, then check out our list of thesis statement examples below.

Thesis statement examples

A quick note that these thesis statements have not been fully researched. These are merely examples to show you what a thesis statement might look like and how you can implement your own ideas into one that you think of independently. As such, you should not use these thesis statements for your own research paper purposes. They are meant to be used as examples only.

• Vaccinations Because many children are unable to vaccinate due to illness, we must require that all healthy and able children be vaccinated in order to have herd immunity.
• Educational Resources for Low-Income Students Schools should provide educational resources for low-income students during the summers so that they don't forget what they've learned throughout the school year.
• School Uniforms School uniforms may be an upfront cost for families, but they eradicate the visual differences in income between students and provide a more egalitarian atmosphere at school.
• Populism The rise in populism on the 2016 political stage was in reaction to increasing globalization, the decline of manufacturing jobs, and the Syrian refugee crisis.
• Public Libraries Libraries are essential resources for communities and should be funded more heavily by local municipalities.
• Cyber Bullying With more and more teens using smartphones and social media, cyber bullying is on the rise. Cyber bullying puts a lot of stress on many teens, and can cause depression, anxiety, and even suicidal thoughts. Parents should limit the usage of smart phones, monitor their children's online activity, and report any cyber bullying to school officials in order to combat this problem.
• Medical Marijuana for Veterans Studies have shown that the use of medicinal marijuana has been helpful to veterans who suffer from Post-Traumatic Stress Disorder (PTSD). Medicinal marijuana prescriptions should be legal in all states and provided to these veterans. Additional medical or therapy services should also be researched and implemented in order to help them re-integrate back into civilian life.
• Work-Life Balance Corporations should provide more work from home opportunities and six-hour workdays so that office workers have a better work-life balance and are more likely to be productive when they are in the office.
• Teaching Youths about Consensual Sex Although sex education that includes a discussion of consensual sex would likely lead to less sexual assault, parents need to teach their children the meaning of consent from a young age with age appropriate lessons.
• Whether or Not to Attend University A degree from a university provides invaluable lessons on life and a future career, but not every high school student should be encouraged to attend a university directly after graduation. Some students may benefit from a trade school or a "gap year" where they can think more intensely about what it is they want to do for a career and how they can accomplish this.
• Studying Abroad Studying abroad is one of the most culturally valuable experiences you can have in college. It is the only way to get completely immersed in another language and learn how other cultures and countries are different from your own.
• Women's Body Image Magazines have done a lot in the last five years to include a more diverse group of models, but there is still a long way to go to promote a healthy woman's body image collectively as a culture.
• Cigarette Tax Heavily taxing and increasing the price of cigarettes is essentially a tax on the poorest Americans, and it doesn't deter them from purchasing. Instead, the state and federal governments should target those economically disenfranchised with early education about the dangers of smoking.
• Veganism A vegan diet, while a healthy and ethical way to consume food, indicates a position of privilege. It also limits you to other cultural food experiences if you travel around the world.
• University Athletes Should be Compensated University athletes should be compensated for their service to the university, as it is difficult for these students to procure and hold a job with busy academic and athletic schedules. Many student athletes on scholarship also come from low-income neighborhoods and it is a struggle to make ends meet when they are participating in athletics.
• Women in the Workforce Sheryl Sandberg makes a lot of interesting points in her best-selling book, Lean In , but she only addressed the very privileged working woman and failed to speak to those in lower-skilled, lower-wage jobs.
• Assisted Suicide Assisted suicide should be legal and doctors should have the ability to make sure their patients have the end-of-life care that they want to receive.
• Celebrity and Political Activism Although Taylor Swift's lyrics are indicative of a feminist perspective, she should be more politically active and vocal to use her position of power for the betterment of society.
• The Civil War The insistence from many Southerners that the South seceded from the Union for states' rights versus the fact that they seceded for the purposes of continuing slavery is a harmful myth that still affects race relations today.
• Blue Collar Workers Coal miners and other blue-collar workers whose jobs are slowly disappearing from the workforce should be re-trained in jobs in the technology sector or in renewable energy. A program to re-train these workers would not only improve local economies where jobs have been displaced, but would also lead to lower unemployment nationally.
• Diversity in the Workforce Having a diverse group of people in an office setting leads to richer ideas, more cooperation, and more empathy between people with different skin colors or backgrounds.
• Re-Imagining the Nuclear Family The nuclear family was traditionally defined as one mother, one father, and 2.5 children. This outdated depiction of family life doesn't quite fit with modern society. The definition of normal family life shouldn't be limited to two-parent households.
• Digital Literacy Skills With more information readily available than ever before, it's crucial that students are prepared to examine the material they're reading and determine whether or not it's a good source or if it has misleading information. Teaching students digital literacy and helping them to understand the difference between opinion or propaganda from legitimate, real information is integral.
• Beauty Pageants Beauty pageants are presented with the angle that they empower women. However, putting women in a swimsuit on a stage while simultaneously judging them on how well they answer an impossible question in a short period of time is cruel and purely for the amusement of men. Therefore, we should stop televising beauty pageants.
• Supporting More Women to Run for a Political Position In order to get more women into political positions, more women must run for office. There must be a grassroots effort to educate women on how to run for office, who among them should run, and support for a future candidate for getting started on a political career.

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Should Cigarettes Be Banned? Essay

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Introduction

• Arguments against the Issue
• Arguments for the Issue

For the recognition of whether or why cigarettes should be banned, this essay should start with a bit of history.

Cigarettes are made from tobacco leaves. Their use started in Central America around 6,000 B.C. After 5,000 BC, the Mayan community started chewing and smoking tobacco leaves and used them for medicinal purposes like healing wounds. Later on, people invented pipe smoking, which was followed by the manufacturing of cigarettes in the mid-1800s (Smoking, 2010).

On this page, the author won’t explore why smoking should be banned. The essay will evaluate arguments for and against cigarettes in particular. Many people smoke them to lighten up and enhance their concentration at places of work. Meanwhile, some claim that this relaxation method is too harmful to enjoy.

So, should cigarettes be banned? This essay attempts to find out.

Why Cigarettes Should Be Banned: Arguments against

Smoking cigarettes helps people to relax and get better concentration. Mental illness symptoms such as anxiety and Schizophrenia are alleviated by smoking (Russo, 2011); this has been medically proven. Smoking cigarettes helps in socialization as it sets the mood of a smoker into being jovial.

Governments obtain huge amount of money from cigarette manufacturing industries in form of taxes. These industries also create employment opportunities for many people. Banning of cigarette smoking would mean loss of thousands of jobs as well as revenue for the government (Fix, n.d.).

Smoking cigarettes helps in weight management due to the reduced appetite induced in the body by cigarettes. Therefore, smoking is a good and effective weight loss aid (Auctions, 2010).

Why Cigarettes Should Be Banned: Arguments for

Smoking cigarettes is one of the major causes of deaths. About 443, 000 people die out of cigarette smoking related illnesses in the U.S. every year (CDC, 2011 ). Cigarettes contain many harmful chemicals; it was found that cigarettes have more than 4,000 chemicals. Most of these components are known to cause cancer.

Smoking is known to cause lung cancer, bladder cancer, stomach Cancer, kidney cancer, cancer of oral cavity and cancer of the cervix. Ammonia, Tar and Carbon Monoxide are found in cigarettes and are very harmful to human body (Society, 2010).

Cigarette smoking has great effects on reproductive health. It is known to cause infertility, still births, low birth weight and sudden infant death syndrome (SIDS). In addition, it affects the bones by reducing their densities. Hip fractures in female cigarette smokers are higher than in female non smokers (CDC, 2011 ).

Banning of cigarette smoking would come with many benefits. First people’s health would be improved. Health benefits of stopping to smoke are more than the emotional or psychological comfort that are brought by smoking. Banning cigarette smoking would be of great benefit to the young people.

Those in their thirties, in terms of age in years, would still benefit from the reduced risks caused by cigarettes. Old people who would wish stop smoking cigarettes would not be late to do so. Banning of cigarette smoking will be beneficial to all smokers regardless of their age (Society, 2010).

Many cigarette smokers are at higher risk of being infected with different types of cancer. These include: “Lung, Larynx, Oral cavity, Esophagus, Kidney, Cervix, Bladder, stomach among other cancers” (Society, 2010, p. 1).

Smoking induces stress. A research in London showed that a group of people who stopped smoking had reduced stress than those who had continued to smoke after one year; this was because those who continued to smoke greatly depended on cigarettes.

A smoker is more prone to be stressed if he/she is not in a position to quench a thirst for smoking therefore failure to smoke will subjected smokers to stress (Benson, 2010). Banning of cigarette smoking would therefore reduce stress levels in people. Peer groups will be made of non smokers. People will look for other ways to cope with stress and anxiety other than smoking.

Economic burden on countries will be reduced by banning of cigarette smoking: “in the year 2000, 8.6 million people in U.S suffered from at least one chronic disease that was associated with cigarette smoking” (CDC, 2011, p. 1). Majority of these people ailed from more than one of the diseases caused by cigarette smoking (Society, 2010).

Though smoking cigarettes creates employment and contributes to government’s revenues, it causes more harm than good. The quality of life led by cigarette smokers is lowered. Furthermore, their quality of work is decreased because they might not attend to their duties regularly in extreme cases of being affected by ailments caused by cigarettes (Society, 2010).

Banning of cigarette smoking would eliminate exposure of the human body to harmful substances. Tar is carcinogenic. Nicotine is the addictive substance in cigarette that causes mental and emotional dependence on cigarettes (Society, 2010). Nicotine also elevates cholesterol levels in the body.

Carbon Monoxide takes oxygen from the body of the user and this may cause Chronic Obstructive Pulmonary Disorder (Netdoctor, 2005). Banning of cigarette smoking will reduce the above risks which are the main causes of poor health in cigarette smokers.

Reproductive health of people will to some extent be guaranteed by banning of cigarette smoking. Tobacco related infertility in women and impotence in men would be no more. Risks of miscarriage, premature births and still births would be reduced thus saving lives of babies (Society, 2010).

Cigarette smoking is a major health challenge. It causes many health problems including reproductive disorders, cancer, stress, heart diseases and stroke. Banning of cigarette smoking would largely benefit people’s health.

Auctions, G. (2010). Advantages and Disadvantages of Smokinng . Web.

Benson, J. (2010). Smoking increases stress levels . Web.

CDC. (2011). Smoking and Tobacco Use . Web.

Fix, W. Should Smoking be Banned . Web.

Netdoctor. (2005). Smoking Health Risks . Web.

Russo, J. (2011). Health Benefits of Smoking Cigarettes . Web.

Smoking, H. (2010). The History of Smoking . Web.

Society, A. C. (2010). Cigarette Smoking . Web.

• Integrations in the Health Care Institutions
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• Should Smoking Be Banned in Public Places?
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Impact of cigarette tax increase on health and financing outcomes in four Indian states

Daphne c. wu.

1 Centre for Global Health Research, St. Michael's Hospital, Toronto, Toronto, Ontario, M5B 1W8, Canada

Vikas Sheel

2 Ministry of Health and Family Welfare, Government of India, New Delhi, New Delhi, India

Pooja Gupta

Beverley m. essue, prabhat jha, associated data, underlying data.

Figshare: Data inputs and data sources for impact of cigarette tax increase on health and financing outcomes in four Indian states. https://doi.org/10.6084/m9.figshare.12043074 16

This project contains the following underlying data:

• Extended data. xlsx
• ○ Table 1. Tax structure for different lengths of non-filtered and filtered cigarettes in 2018-19.
• ○ Table 2. Data inputs and data sources (Study data input with sources for analysis))

Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0).

Peer Review Summary

Background : In India, about one million deaths occur every year due to smoking. Tobacco taxation is the most effective intervention in reducing smoking. In this paper, we examine the impact of a one-time large cigarette price increase, through an increase in excise tax, on health and financing outcomes in four Indian states.

Methods : We used extended cost-effectiveness analysis to estimate, across income quintiles, the life-years gained, treatment cost averted, number of men avoiding catastrophic health expenditures and extreme poverty, additional tax revenue collected, and savings to the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) with a cigarette price increase to Indian Rupees (INR) 10 plus 10% ad valorem in four Indian states.

Results : With the price increase, about 1.5 million men would quit smoking across the four states, with the bottom income group having 7.4 times as many quitters as the top income group (485,725 vs 65,762). As a result of quitting, about 665,000 deaths would be averted. This would yield about 11.9 million life-years, with the bottom income group gaining 7.3 times more than the top income group. Of the INR 1,729 crore in treatment cost averted, the bottom income group would avert 7.4 times more than the top income group. About 454,000 men would avoid catastrophic health expenditures and 75,000 men would avoid falling into extreme poverty. The treatment cost and impoverishment averted would save about INR 672 crore in AB-PMJAY. The tax increase would in turn, generate an additional tax revenue of about INR 4,385 crore. In contrast to the distribution of health benefits, the extra revenue generated from the top income group would be about 3.1 times that from the bottom income group.

Conclusions : Cigarette tax increase can provide significant health and economic gains and is a pro-poor policy for India.

Introduction

Tobacco use is the leading cause of preventable premature mortality globally 1 . In India, about one million deaths occur every year due to tobacco smoking 2 . Cessation substantially reduces the risk of dying; in particular cessation before age 40 reduces the risk of death associated with continued smoking by about 90% 3 . Yet, cessation remains uncommon in India. According to the Global Adult Tobacco Survey (GATS), in 2009–10, 5.7% of adults aged 15 years and above (10.3% males, 0.8% females) smoke cigarettes in India 4 ; this only decreased to 4.0% (7.3% males, 0.6% females) in 2016–17 5 . Tobacco use is also more prevalent among the poor, who in turn, fall into greater poverty, as poor families spend a larger proportion of their income on tobacco and are at a much higher risk of falling ill and dying from smoking-attributable diseases, thus imposing additional costs to the family 6 .

The most effective intervention to reduce tobacco use is a large increase in the federal excise tax on cigarettes that enables minimal downward substitutions to shorter, cheaper cigarettes 1 , 7 – 9 . Evidence from several low- and middle-income countries (LMICs) has shown that the impact of tobacco taxation would disproportionately favour populations on lower income 10 – 15 . To date, however, no study has examined the impact of tobacco tax increase across income groups at the subnational level. In this study, to support tobacco control policies through increased tobacco taxation in India, we estimated the impact of a cigarette price increase through an increase in excise tax from the 2018-19 tax structure (Underlying data 16 ) to 10 Indian Rupees (INR) plus 10% ad valorem , across income groups in four states in India.

We used the extended cost-effectiveness analysis (ECEA) model that was developed in the Disease Control Priorities Project 17 , and was previously used to estimate the impact of a 50% increase in the price of cigarettes on health, poverty, and financial outcomes in 13 middle-income countries, and the impact of cigarette price increase in Vietnam 12 , 14 . The model was used to estimate the impact across five income groups in four states in India of a cigarette price increase, resulting from a tax increase from the 2018-19 tax structure to INR 10 plus 10% ad valorem for all lengths of filtered cigarettes on smoking reduction, deaths averted due to major tobacco-attributable diseases (chronic obstructive respiratory disease (COPD), stroke, heart disease and cancer), life-years gained, treatment cost averted, number of men avoiding catastrophic health expenditures and extreme poverty, additional tax revenues raised from the tax increase, and cost savings to the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).

Study population

We selected four states in India, namely Karnataka, Assam, Uttar Pradesh, and Maharashtra, based on recommendations from the Indian Ministry of Health and Family Welfare. These four states are also characterized by diverse socioeconomic demographic characteristics, tobacco use, and health insurance coverage. We focussed on male smokers aged 15 years and older, as they constitute more than 90% of all cigarette smokers in India 5 . To estimate the number of smokers by age and income groups in each state, we applied the age-specific smoking prevalence for males in each state from the second round of GATS survey in India in 2016–17 to the male population in each state 4 . The male population in each age group for each state was estimated demographic data from the 2011 Census of India, applied to the Indian male population and projected by the United Nations Population Division for 2018 18 , 19 . As the GATS survey did not report prevalence based on income, we used education level as a proxy for income group, such that those with no formal education were classified as the poorest 20% of the population and those with college education or higher were classified as the richest 20% of the population.

Cigarette price and price increase

We calculated the base price of the different lengths of filtered cigarettes sold in India (less than 65 mm, 65–70 mm, 70–75 mm and longer than 75mm) using data from Market price A.C. Nielson for 2014 20 , and inflated the price using the inflation rate in India for 2018 obtained from the World Bank Development Indicators 21 . We focussed only on filtered cigarettes as they constitute more than 92% of the market shares in India. Applying the Goods and Services Tax (GST), GST Compensation Cess and the National Calamity Contingency Duty (NCCD) in accordance with the tax structure for cigarettes in India in 2018-19 to the base price 22 , we obtained the 2018-19 market price of a pack of 20 cigarettes. Using the proposed tax of INR 10 (which includes GST, GST Compensation Cess, and NCCD) plus 10% ad valorem , we calculated the percentage increase in market price. We assumed that the tax increase will be passed on to consumer prices, as recent analyses in India showed that in nearly all cases, most of the tax hikes were passed onto smokers, but tax decreases did not reduce consumer prices 23 . The market price was assumed to be uniform in all of the four states studied.

Price elasticity

For this study, we considered a conservative scenario and used the average price elasticity for cigarette demand in both high and low- and middle-income countries of -0.40 12 , 24 , 25 . The price elasticity in India is likely to be higher, as John (2008) reported a price elasticity of -0.34 26 . We used this elasticity in our sensitivity analysis (see Sensitivity Analysis section below). Research suggests that young people and smokers who are on low income are more price sensitive than older people and smokers who are on high income 24 , 27 . Hence, we used two times the price elasticity (-0.80) for young smokers aged 15–24 years, as reported by the U.S. Department of Health and Human Services and International Research Agency for Cancer 24 , 28 . For smokers in the lowest income quintile and those in the highest income quintile, we used the price elasticity of -0.64 and -0.12, as used by the Global Tobacco Economics Consortium (GTEC) 12 . We also assumed that the price elasticity of quitting is half of the price elasticity of demand.

Effects of cigarette price increase on quitting, life-years gained, disease costs, income poverty, tax revenue, and cost savings to AB-PMJAY

We used the ECEA model to estimate the impact of the cigarette price increase on quitting, number of deaths attributable to four major tobacco-attributable diseases (chronic obstructive respiratory disease (COPD), stroke, heart disease and cancer) averted, life-years gained, treatment cost averted (all treatment cost, most of which are paid out of pocket in India) due to the four tobacco-attributable diseases, number of men avoiding catastrophic health expenditures and extreme poverty, as defined by the World Bank as income of under $1.90 per day in purchasing power parity, and additional tax revenues collected 12 , 14 . To estimate the cost savings to AB-PMJAY─ the National Health Protection Scheme in India which provides a health insurance cover of INR 5 lakh to families living below the poverty line─ we added the cost savings in AB-PMJAY due to men prevented from falling below the poverty line to the treatment cost for those living below the poverty line before the tax increase. To obtain the former cost, we applied a 50% risk of dying from tobacco-attributable diseases, the proportion of smoking-related deaths due to COPD, stroke, heart disease, and cancer obtained from the Indian Million Death Study 2 , and the treatment cost of each disease to the number of men who would otherwise have continued to smoke and hence, fall below the poverty line. The data inputs and sources of data are available as Underlying data 16 . For indicators where state-level estimates could not be obtained, national estimates were used. All treatment costs obtained from the literature were converted to INR and inflated to the costs in 2018 using the exchange rate and consumer price index obtained from the World Bank Development Indicators 21 .

Sensitivity analysis

We conducted sensitivity analyses to examine the impact of a 25% and 100% price increase with the price elasticity of demand for cigarettes of -0.40, and that of INR 10 plus 10% ad valorem with the cigarette price elasticity of -0.34 in India 26 . For the lowest income group, we used a price elasticity of -0.635, as done by GTEC 12 .

All analyses were performed using Stata version 15.1 29 .

Smoking prevalence in Karnataka, Assam, Uttar Pradesh and Assam

Among the four states studied, Assam has the highest male cigarette smoking prevalence of 9.7% ( Table 1 ), and Uttar Pradesh has the highest absolute number of cigarette smokers of about 6.5 million men. Maharashtra has the lowest smoking prevalence overall as well as for almost all age groups. In Assam and Maharashtra, cigarette smoking prevalence is higher among the higher income groups, whereas in Uttar Pradesh, the prevalence is higher among the lower income groups. In Karnataka, the prevalence was comparable across all income groups.

Before the price increase, an estimated total of about 10.7 million males older than 15 years smoked cigarettes across all of the four states studied ( Table 2 ). Men in the bottom income group (poorest 20% of the population) accounted for 21%, while men in the top income group (richest 20% of the population) accounted for 15% of the total number of male smokers.

Impact of tax increase to INR 10 + 10% ad valorem across Karnataka, Assam, Uttar Pradesh and Assam

In 2018-19, the average market price of filtered cigarettes for a pack of 20 is about INR 224.49. With a tax increase to INR 10 plus 10% ad valorem , the price would increase to INR 344.04. This represents a 53.25% price increase. This increase in cigarette price would lead to about 1.5 million men quitting smoking across the four states, with the bottom income group having 7.4 times as many quitters as the top income group (485,725 vs 65,762). An estimated total of 665 thousand deaths due to COPD, stroke, heart disease, and cancer would be averted among current smokers due to quitting. The number of averted deaths in the bottom income group would be 7.4 times that in the top income group (210,289 vs 28,610). The deaths averted due to quitting would yield an estimated 11.9 million life-years, with the bottom income group gaining 7.3 times more life-years than those in the top income group (3,751,930 vs 513,319).

The cost averted for treating the four major tobacco-attributable diseases would amount to more than INR 1,729 crore ($Int 955 million). The treatment cost averted in the bottom income group would be 7.4 times higher than in the top income group (INR 467 crore vs 64 crore, or $Int 258 million vs 35 million). As a result of the total treatment cost averted, about 454 thousand men would avoid catastrophic health expenditures and about 75 thousand men would avoid falling into extreme poverty. The treatment cost and impoverishment averted would save about INR 672 crore ($Int 371 million) in AB-PMJAY. The increase in excise tax would generate an additional tax revenue of about INR 4,385 crore ($Int 2,422 million). In contrast to the distribution of health benefits, the extra revenue generated from men in the top income group would be about 3.1 times that from the bottom income group (INR 1,440 crore vs 460 crore, or $Int 759 million vs 254 million).

In Karnataka, there are about 1.7 million male cigarette smokers aged 15 and above in 2016–17. Men in the bottom and the top income groups each account for about 21% of the total number of smokers. Smoking prevalence declined modestly with age in those aged 15–29 to 60–69 but increased in those aged 70 and above.

With a 53.25% increase in cigarette price through the excise tax increase, about 215 thousand men would quit smoking, with the bottom income group having five times as many quitters as the top income group (75,743 vs 15,017). Quitting as a result of the price increase would avert about 92 thousand deaths due to COPD, stroke, heart disease, and cancer among male smokers. The number of deaths averted in the bottom income group would be five times that in the top income group (32,353 vs 6,414). As a result of the deaths averted, Karnataka would gain about 1.6 million life-years and avert about INR 294 crore ($Int 162 million) in treatment cost for treating the four tobacco-attributable diseases. The averted treatment cost in the bottom income group would be 4.8 times that in the top income group (INR 84 crore vs 18 crore, $Int 47 million vs 10 million). About 72 thousand men would avoid catastrophic health expenditures, with the bottom income group avoiding 6.7 times that of the top income group (22,618 vs 3,355). The tax increase would generate about INR 1,433 crore ($Int 792 million), of which the top income group would contribute 1.7 times that from bottom income group (INR 297 crore vs 228 crore, $Int 220 million vs 126 million).

Of the four states studied, Assam has the highest male cigarette smoking prevalence of 9.7% or about 1.2 million male cigarette smokers. Cigarette smoking prevalence vary considerably across age groups, with the highest prevalence among males aged 15–29 and lowest among males aged 60–69. The prevalence increases with income.

With a 53.25% increase in cigarette price, about 161 thousand men would quit smoking, with the bottom income group having twice as many quitters as the top income group (31,866 vs 15,706). Quitting as a result of the price increase would avert about 73 thousand deaths due to COPD, stroke, heart disease, and cancer among male smokes. The number of deaths averted in the bottom income group would be twice that in the top income group (14,467 vs 7,131). As a result of the deaths averted, Assam would gain about 1.3 million life-years and avert about INR 172 crore ($Int 95 million) in treatment cost for treating the four tobacco-attributable diseases. The averted treatment cost in the bottom income group would be 2.8 times that in the top income group (INR 37 crore vs 13 crore, $Int 20 million vs 7 million). As a result of the treatment cost averted, about 46 thousand men would avoid catastrophic health expenditures, and about 2,635 men would avoid falling into extreme poverty. The treatment cost and impoverishment averted would save about INR 55 crore ($Int 30 million) in AB-PMJAY. The tax increase would generate more than INR 638 crore ($Int 352 million), of which the top income group would contribute 6.7 times that from bottom income group (INR 240 crores vs 36 crore, $Int 132 million vs 20 million).

Uttar Pradesh

Uttar Pradesh has an overall male cigarette smoking prevalence of 8.6%, but has the highest number of male cigarette smokers among the four study states of about 6.5 million. The prevalence is highest among men aged 30–44 and declines with age to 4.3% among those aged 70 and above. In contrast to Assam, smoking prevalence decreases with income.

With a 53.25% increase in cigarette price, more than 1 million men would quit smoking, with the bottom income group having 18.8 times as many quitters as the top income group (322,707 vs 17,150). Quitting as a result of the price increase would avert about 439 thousand deaths due to COPD, stroke, heart disease, and cancer among male smokers. The number of deaths averted in the bottom income group would be 18.8 times that in the top income group (139,821 vs 7,431). As a result of the deaths averted, Uttar Pradesh would gain about 7.8 million life-years and avert about INR 1,112 crore ($Int 614 million) in treatment cost for treating the four tobacco-attributable diseases. The averted treatment cost in the bottom income group would be 15.4 times that in the top income group (INR 289 crore vs 19 crore, $Int 159 million vs 10 million). Due to the treatment cost averted, about 299 thousand men would avoid catastrophic health expenditure, 72 thousand men would avoid falling into extreme poverty, and about INR 618 crore ($Int 341 million) would be saved in AM-PMJAY. The tax increase would generate about INR 1,465 crore ($Int 809 million), of which the top income group would contribute 5 times that from bottom income group (INR 483 crore vs 96 crore, $Int 267 million vs 53 million).

Maharashtra

Among the four study states, Maharashtra has the lowest male cigarette smoking prevalence of 2.7%. Smoking prevalence varies across age groups with the highest prevalence among men 30–44 years (3.4%) and lowest among men aged 70 and above (0.47%). Similar to Assam and in contrast to Uttar Pradesh, the prevalence increases with income.

With a 53.25% increase in cigarette price, about 143 thousand men would quit smoking, with the bottom income group having more than three times as many quitters as the top income group (55,410 vs 17,889). Quitting as a result of the price increase would avert about 61 thousand deaths due to COPD, stroke, heart disease, and cancer among male smokers. The number of deaths averted in the bottom income group would be 3.1 times that in the top income group (23,647 vs 7,635). As a result of the deaths averted, Maharashtra would gain about 1 million life-years and avert about INR 151 crore ($Int 83 million) in treatment cost for treating the four tobacco-attributable diseases. The averted treatment cost in the bottom income group would be about 4.2 times that in the top income group (INR 57 crore vs 14 crore, $Int 32 million vs 8 million). About 37 thousand men would avoid catastrophic health expenditures, with the bottom income group avoiding more than five times that of the top income group (15,409 vs 2,775). The tax increase would generate about INR 848 crore ($Int 468 million), of which the top income group would contribute 3.2 times that from bottom income group (INR 319 crore vs 100 crore, $Int 176 million vs 55 million).

Our sensitivity analysis yielded similar results. Across all three scenarios (25% price increase, 100% price increase, and price increase to INR 10 plus 10% ad valorem with a price elasticity of -0.34), the ratio of the additional life-years gained, treatment cost averted, and number of men avoiding catastrophic health expenditure between the bottom and the top income groups is similar to that in the baseline scenario ( Figure 1a–c ). Compared to the baseline scenario, with a 25% cigarette price increase, the ratio of the additional tax revenue collected from the top income group to the bottom income group increases in all four states, while with a 100% price increase, the bottom income group would accrue tax savings as a result of quitting and reduced consumption ( Figure 1d ). The cost savings to AB-PMJAY, in Assam and Uttar Pradesh, from a 25% price increase would be less than half that from the baseline scenario (INR 26 crore 55 crore in Assam, and INR 290 crore vs 618 crore in Uttar Pradesh), while that from a 100% price increase would be almost double (INR 103 crore in Assam and INR 1,160 crore in Uttar Pradesh) ( Figure 1e ). The findings using the Indian price elasticity of -0.34 are similar to that of the baseline scenario.

This study confirms that significant tax increases on filtered tobacco would be associated with pro-poor health outcomes as well as significant reductions in poverty and levels of catastrophic health expenditure in the Indian population. Increasing the market price of filtered tobacco is estimated to have a higher impact on the smoking rates of lower income Indian households, and as a result, poorer households bare a lower share of the overall net increased market cost. This study reaffirms that tobacco taxation is an important public policy approach that is associated with a pro-poor impact in India, as also found in other LMICs 10 – 15 .

The findings from this subnational analysis of four states are broadly consistent with the trends seen in the national results 12 . However, the magnitude of effects differs across states. For example, the ratio between the outcomes between the first and fifth income groups is largest in Uttar Pradesh due to a wide gap in the rates of cigarette smoking between the first and fifth income groups (11.4 vs 6.3%). In this state, the poor would benefit the most from large tax increases and this benefit is significantly higher than the national estimate. The subnational results provide an important economic platform to engage with state-level decision makers and other stakeholders to demonstrate the differential impact that higher cigarette taxes can achieve within their jurisdictions. These results should be used to stimulate action from the local level and foster a groundswell of political buy-in to advance the national agenda to adopt higher tobacco taxes. Leveraging sub-national data to develop an economic case for stronger tobacco taxation policies is a strategy that is currently being pursued in several other settings including Mexico and Colombia 30 .

The number of men avoiding impoverishment is minimal in Karnataka and Maharashtra, which is likely because of a higher income level overall in these two states. Similarly, cost-savings to AB-PMJAY is also small in these states as fewer people are eligible to AB-PMJAY. While the potential to alleviate poverty was minimal, the higher taxes would be associated with an avoidance of a significant amount of treatment costs and reductions in catastrophic health expenditures in both states and the highest share of these reductions would be among the poorest groups. By applying the ECEA method, we have demonstrated the impact that higher cigarette taxes will have on the two key indicators that are used to assess progress towards achieving financial risk protection and universal health coverage, namely avoidance of illness-related poverty and catastrophic health expenditures 31 . This work highlights the criticality of this fiscal policy measure for achieving universal health coverage and the Sustainable Development Goals (SDGs).

There is now robust evidence generated from several LMICs that support the role of tobacco taxation policies in achieving significant health outcomes, particularly among the poor, as well as an overall reduction in poverty 10 – 15 . By curbing rates of tobacco-related non-communicable diseases in LMICs, tobacco taxation is also a means to advance economic development in these settings. Yet, the momentum for implementing and sustaining this fiscal policy approach has yet to be achieved in India and other settings. Advancing more aggressive taxation of tobacco across India and other LMICs is urgently needed to align with the recommendations of the FCTC. Recent reports suggest that for most countries, the increases that have been made to date are still far too small to significantly alter smoking rates 32 .

This study has limitations. First, we used education as the proxy for income. This may underestimate the true socioeconomic status of households. Second, a subset of subnational inputs was not available and so national inputs were used. In some cases this could under or overestimate the effects, though we anticipate the impact would be minimal as national data were substituted for less than 20% of overall inputs. Third, AB-PMJAY has expanded to beyond covering only those living below the poverty line 33 . Hence, savings to AB-PMJAY due to averted treatment costs is likely much higher than estimated. Fourth, we have not accounted for the potential substitution to other tobacco products.

Tobacco taxation remains the single most effective public policy approach for curbing smoking rates. In this study, we confirm that the poorest will benefit the most from an increase in cigarette taxes, with more life-years gained, more premature deaths and treatment costs averted, and more cases of poverty and catastrophic health expenditures avoided compared to the richest income groups. By applying the ECEA method at the subnational level, we provide first-ever estimates of the differential impact of cigarette taxes within the Indian population. The estimates generated for each of the four states provide a powerful economic input that will equip state-level decision-makers to make a strong case for higher taxes within national debates. From this work, state-level decision makers can also make the important link between cigarette taxes and the SDGs (e.g. SDG 1: End poverty in all its forms everywhere), given the substantial impact that higher taxes will also have on alleviating poverty within the population.

Data availability

[version 1; peer review: 1 approved, 2 approved with reservations]

Funding Statement

This work was supported by the Bill and Melinda Gates Foundation [OPP51447] This work was also supported by the International Development Research Centre, Cancer Research UK [108819]

The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

Reviewer response for version 1

Corné van walbeek.

1 Research Unit on the Economics of Excisable Products, School of Economics, Faculty of Commerce, University of Cape Town, Cape Town, South Africa

This is an interesting paper that considers the impact of a sizable increase in the excise tax in four Indian states. By international standards, smoking prevalence in India (and in these states) is not high. The authors show that an increase in the excise tax to 10 INR (presumably per stick, although this was not clear) plus an additional 10% tax would result in positive public health and fiscal results in all four states.

The rationale for the choice of these four states is not clear, but one gets the impression from the Discussion that this research was done with the aim to advocate for higher taxes in these four states. That is a worthy cause, although, given the size of India, a tax at the national level would have a multiplied effect, compared to a tax increase in just four states.

The significant contribution of this study is that it indicates that an excise tax increase is strongly progressive/pro-poor, in that the poor benefit much more than the rich.

While the results are generally believable at the intuitive level, the authors do not provide sufficient information to allow others to replicate the study. The DOI link to the data did not work when I tested it. 

The finding that the excise tax increase will result in many thousands of men escaping extreme poverty, requires further explanation and justification. The authors indicate (quite correctly) that the poor's demand for tobacco is more price elastic than the non-poor. Thus a greater percentage of the poor will quit when faced with a higher price of cigarettes (or tobacco more generally). But what about those smokers who do not quit smoking when they are faced with a higher price? Some may cut back on their consumption (there is evidence of that in the literature), but even for them, their total expenditure on cigarettes/tobacco may increase. For some poor smokers who are unable/unwilling to reduce their consumption, a sizable increase in the price of cigarettes will have a significant effect on their total expenditure. In some cases this will push some smokers into extreme poverty (for those who are on the verge of extreme poverty before the tax increase), or push them further into extreme poverty. The paper says nothing about this 

The authors show that of the 2.247 million poor (lowest 20%) smokers, about 486 thousand will quit. That means that more than 1.6 million smokers do not quit and will probably increase their expenditure on cigarettes. I do not think that this is considered, and it should be.

The authors state up front, and again in the limitations, that they use education as a proxy for income. I don't know India well, and I can accept that education and income are highly correlated, but why don't the authors simply call it what it is, namely differences in education?

Also, the authors acknowledge that their analysis does not account for product substitution. Whether that is a big potential issue, I cannot judge. However, the authors say nothing about cross-state shopping. Is it a big potential problem? 

I appreciate that this paper was written primarily for an Indian audience, and I suspect that  the target market would be policy makers in these four states, but the paper does not indicate whether sub-national taxes are common in India, whether other states have already implemented such tobacco taxes, and whether the constitution/government allows states to implement them. 

As a technical document the paper is adequate and useful, but there are a number of issues that are hanging in the air, and that should, ideally, have more discussion and analysis.

Is the work clearly and accurately presented and does it cite the current literature?

If applicable, is the statistical analysis and its interpretation appropriate?

Are all the source data underlying the results available to ensure full reproducibility?

Is the study design appropriate and is the work technically sound?

Are the conclusions drawn adequately supported by the results?

Are sufficient details of methods and analysis provided to allow replication by others?

Reviewer Expertise:

I have worked on the economics of tobacco control for more than 20 years, focusing on taxation, tax modelling,  tobacco pricing and illicit trade, primarily in South Africa, but also in other LMICs.

I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard, however I have significant reservations, as outlined above.

Rijo M. John

1 Centre for Public Policy Research (CPPR), Kochi, Kerala, India

General comments:

This study examines the implication of an arbitrary cigarette tax increase on select outcomes such as life years gained, tax revenue generated, amount of catastrophic health expenditures averted and savings on a national health care scheme. It focuses its analysis on 4 select Indian states—Karnataka, Assam, Uttar Pradesh, and Maharashtra—chosen rather arbitrarily. This is one of the few recent studies to have examined the impact of tax increase at the subnational level and the kind of outcome variables the study focuses are quite relevant from a public health policy point of view. The study and its conclusions are quite useful for tobacco control policy in India, and taxation in particular. An important policy relevant conclusion from the study is that cigarette tax increases are disproportionately beneficial for India’s poor. This counters the age-old tobacco industry argument that tobacco taxes are regressive. This study establishes it is not.

Although the study provides insightful analysis of the impact of a proposed tax increase, it comes with certain limitation most of which may be addressed rather quickly. Below are my specific comments on the same, not necessarily in the order of its importance.

Specific comments:

• Methods para 1 says “Tax increase from the 2018-19 tax structure to INR 10 plus 10% ad valorem for all lengths of filtered cigarettes”. It is not clear why this particular combination of the tax was selected as a proposal and whether this will be in addition to the existing taxes or inclusive of the existing tax. What is also not clear is where this is proposed to be applied given that current cigarette tax structure has varied components including excise tax, national calamity contingent duty (NCCD), base GST rate (28%) and compensation cess. However, later on, from the appendix table provided, it becomes clear that the proposed tax is to be applied as a compensation cess. These details may not be obvious to a less informed reader.
• Study population: “we used education level is a proxy for income group”. While it may be fine to use education as a proxy for income, GATS allows estimation of wealth quintiles as it provides a variety of information on the possession of different assets. Principal component analysis is usually applied to estimate such wealth quintiles from this type of surveys. The use of education as a proxy for income may be the reason for some strange prevalence figures in Table 1. For example, cigarettes, especially the filter cigarettes, are usually consumed by the relatively well-off people in India and the poor tend to smoke more of bidis. In Table 1, however, it is seen that the bottom two quintiles have cigarette smoking prevalence many times higher than the upper quintiles in UP. Although this proxy is mentioned as a limitation, I think, this is something that can be overcome using more appropriate techniques for generating income groups.
• Cigarette price and price increase: “we obtained the 2018–19 market price of a pack of 20 cigarettes”. It is not clear why FY 2018-19 was chosen as the benchmark year for the study simulation. Union budget for FY 2019-20 re-introduced excise taxes on tobacco products, albeit nominally. This changes the tax structure and it would’ve been better had the analysis made after taking this into account. In addition, the union budget for FY 2020-21 more than doubled NCCDs applied on cigarettes. Because the benchmark year is kept as 2018-19 and there have been two rounds of tax increase including one structural change in the subsequent annual budgets, the actual estimated impact of this proposal may not be accurate as the actual prices are already higher than what is assumed in the simulation. It would be better for the simulation benchmark to reflect the actual existing taxes (both rate & structure) on cigarettes in order to estimate the true impact.
• Price elasticity: Income group wise price elasticity estimates are available in India from a study in 2015 by Selvaraj et al. (2015 1 ). The authors might want to try these out or use these at least for sensitivity analysis.
• The subsection “Impact of tax increase to INR 10 + 10% ad valorem” need to make it clear upfront whether the proposed increase is on top of existing taxes or inclusive of existing tax. Upon examining the supplied appendix table 1, I was able to figure out that it is indeed inclusive of the existing compensation cess. But, the simulation benchmark already says the average existing ad valorem compensation cess is 16.7% while the specific cess is 3.27. The proposal is actually to increase this 3.27 to Rs.10 and decrease the 16.7% to 10%. This needs to be spelled out as such. The authors should also provide the rational for this proposal which appears to be arbitrary in nature. Why would the proposal seek a reduction in existing ad valorem rate while proposing a hike in specific tax? Why Rs. 10 specific and not 15 or 5 or 20? Why there’s an ad valorem rate at all and increase the complexity of tax structure and why not try to make a proposal that will simplify the structure instead? A discussion must address these questions.
• Given that the model uses 2018-19 benchmark as mentioned above, it is not capturing the current excise component in existing tax structure. Moreover, to my knowledge, NCCD is applied along with the excise. The GST and ad valorem compensation cess are applied on this excise inclusive price. However, the model simulation and the estimation of taxes as given in the appendix table 1 doesn’t seem to do it this way. On what basis the proposal assumes that the proposed increase in tax to be applied on compensation cess and not on, say, excise or NCCD? Depending on where this is applied, the implications and estimated final prices and tax burden will differ. It should be also remembered that compensation cess is set to be expired 5 years from the time of GST introduction which means only remaining 2 years for its expiry. If the proposal is to apply the tax increases on compensation cess how can this be sustained when the compensation cess expires? Is proposing the increase on excise a better idea? I suggest authors discuss these issues somewhere on the paper.
• The state-wise discussion of the results talk about the tax revenue generated from the proposed tax increase. It inadvertently give the impression that these tax revenues are accrued to the respective states implementing this tax increase. However, the compensation cess in its entirety goes to the union govt. which in turn uses this to compensate all state governments for revenue shortfalls, if any, they face up to 5 years post GST. Also, under the GST, this increase in compensation cess can’t be made unilaterally by any single state. Any proposal to increase compensation cess will be done through the GST council and shall be applicable to all states. To my knowledge, there is no mechanism for individual states to change the current tax structure on products under the GST. The authors need to clarify/discuss what their proposal will entail in practice.
• The mentioned limitation talks about not accounting for substitution. Although there is no strong evidence of substitution between cigarettes and bidis the same cannot be said about substitution between filtered and un-filtered cigarettes. If tax is increased only on filtered cigarettes, one must realistically expect a certain amount of substitution towards unfiltered cigarettes at least by the relatively lower income group of people. It is not clear why the increase proposal cannot be made such that the increase happen simultaneously on all tiers of cigarettes. This will largely take care of such possible substitution and capture the overall impact more accurately.
• It is also not clear how the model simulation captures the effect of income growth as there is no discussion on the same. The paper only talks about price elasticities. However, annual per capita income growth is significant in LMICs like India. While price increase has negative impact on consumption, income growth can compensate for part of these impact. A combination of price and income are important in determining true affordability of these products. It would be ideal to capture these in the model.
• Typo: discussion second para: “prevalence in UP (11.4% vs. 6.3%)”; It should be 11.3% vs. 3.2% as given in Table 1.
• Typo: Appendix Table 2. Data inputs and data sources (Study data input with sources for analysis)): On row 51 it says the amounts are in VND. It should be INR.
• Guindon et al. (2019 2 ).
• John et al. (2019 3 ). 
• John et al. (2020 4 ).
• Goodchild et al. (2020 5 ).

I have been working on economics of tobacco control with particular interest in India for more than 15 years. I have worked extensively around issues of tobacco taxation in India and have published several peer reviewed research papers on this issue.

M. Govinda Rao

1 Takshashila Institution, Bengaluru, Karnataka, India

Comments on the Study, “Impact of cigarette tax increase on health and financing outcomes in four Indian states”:

This is an important study analysing welfare implications of increases in tax on cigarettes in four Indian States namely, Karnataka, Assam, Uttar Pradesh, and Maharashtra. The authors use an extended cost-effectiveness analysis (ECEA) model developed in an earlier Disease Control Priorities Project to estimate the impact of cigarette price increases caused by tax increase in 2018-19 across five income groups in four states in India. The welfare implications are analysed in terms of smoking reduction, deaths averted due to major tobacco-attributable diseases (chronic obstructive respiratory disease (COPD), stroke, heart disease and cancer), life-years gained, treatment cost averted, number of men avoiding catastrophic health expenditures and extreme poverty, additional tax revenues raised from the tax increase, and cost savings to the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).

The study estimates that, in 2018-19, an increase in the price of cigarettes by 53.25% due to increase in the tax for a pack of 20 would have led to about 1.5 million men quitting smoking across the four states, with the bottom income group having 7.4 times as many quitters as the top income group. It would also have averted 665 thousand deaths due to COPD, stroke, heart disease, and cancer among current smokers due to quitting. The deaths averted due to quitting would had added an estimated 11.9 million life-years, with the bottom income group gaining 7.3 times more life-years than those in the top income group. The cost saving on hospitalisation for avoiding treatment of major tobacco-attributable diseases is estimated at Rs. 1,729 crore ($Int 955 million and the saving is estimated at 7.4 times higher for the bottom income group. This would have helped almost 75 thousand people to falling into extreme poverty. The saving on treatment cost and impoverishment is estimated at Rs. 672 crore ($Int 371 million) in AB-PMJAY and additional tax revenue generated is estimated at Rs. 4,385 crore ($Int 2,422 million).

Thus, the study confirms that significant tax increases on filtered tobacco could improve pro-poor health outcomes and appreciable reductions in poverty. This study reaffirms that tobacco taxation is an important pro-poor public policy. This is a competent piece of work with significant public policy implications. I recommend the article for indexing.

Public Finance

I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard.