CHICAGO, August 8, 2000 - Higher taxes are the key to cutting cigarette consumption, especially among the poor, the young, and the relatively uneducated, the World Health Organization (WHO) and the World Bank conclude in a major new report published today. A tobacco tax increase has been found to be a very effective tool for lowering tobacco use, particularly in developing countries. The publication also debunks the perception that tobacco product smuggling negates the benefits of higher taxes; corruption sets the stage for this illegal activity. And increased tobacco taxes do not lead to net job losses.
Higher taxes leading to a 10 percent rise in cigarette prices would motivate about 42 million people to quit smoking, estimate WHO and World Bank researchers. Raising cigarette taxes could prevent about 10 million tobacco-related deaths (9 million of these in low- and middle-income countries). Not only will tobacco consumption and tobacco deaths drop, but government revenues will actually rise by 7 percent on average for a 10 percent increase in cigarette taxes.
The 512-page book, entitled Tobacco Control in Developing Countries,* is the outcome of a three-year research project involving a team of about 40 economists, epidemiologists, social scientists, public policy pundits and legal experts from 13 countries.
"This research shows that the economic measure of a tax increase is the single most important intervention by governments to curb tobacco consumption," said Dr Gro Harlem Brundtland, WHO director-general. "Governments wishing to halt the rising toll of tobacco-related deaths should strongly consider a tobacco tax hike as a matter of priority."
World Bank President James D. Wolfensohn said the economic aspects of tobacco control are now receiving strong global attention. "Tobacco control is a high priority in our efforts to improve global health," said Wolfensohn. "We are now working with governments in many countries to act on the evidence and recommendations in 'Curbing the Epidemic,' the World Bank's 1999 report. Now, 'Tobacco Control in Developing Countries' makes available a wealth of sound evidence and in-depth analysis of key economic issues in tobacco control."
Tobacco deaths
Unless smoking patterns change, 1 billion people are expected to die from smoking in the 21st century-10 times more than those killed by tobacco throughout the 20th century. "Even modest reductions in a disease burden of such immensity would bring highly significant health gains," says Dr Derek Yach, WHO Executive Director in charge of non-communicable diseases, who leads WHO's Tobacco Free Initiative.
Cigarette smuggling
Almost a third (30 percent) of all cigarette exports-about 355 billion cigarettes a year-are smuggled. This is a far higher percentage than the smuggled amount of most internationally-traded consumer goods. The problem is worst where corruption is rife. The publication's authors note that raising the price of cigarettes could increase sales of contraband cigarettes. However, this new research has determined that levels of corruption within individual countries are a better indicator of smuggling than price increases.
Individual governments that have tried to reduce smuggling by slashing taxes have often suffered a fall in revenues and an increase in consumption. "A more effective response," said Frank Chaloupka, Professor at the University of Illinois, Chicago and joint editor of the book, "would be to keep taxes high and crack down on smuggling. Prominent tax stamps, serial numbers, special package markings, health warning labels in local languages and better tracking systems are effective against smuggling."
Impact on jobs
The report provides fresh evidence to counter fears that a slump in tobacco sales would lead to millions of permanent job losses worldwide. Any impact on employment would be minimal and gradual, said Dr Prabhat Jha, Senior Scientist at WHO, and joint editor of the book.
"If tobacco consumption fell, most countries would experience no net job losses and some would even experience net gains, as money once spent on tobacco was diverted to other goods and services, creating new jobs," he said. "However, if global demand fell, a few tobacco-exporting countries-especially in sub-Saharan Africa-would experience job losses in the longer term and would need some assistance during the adjustment period."
Non-price measures
In addition to raising taxes and curbing smuggling, a package of non-price measures would further reduce demand for tobacco products. These measures include: a total ban on cigarette advertising and promotion (partial bans have little or no impact); consumer information; and smoking restrictions in public places and workplaces. Together these would enable 23 million smokers alive in 1995 to quit smoking and would prevent an additional 5 million tobacco-related deaths worldwide, including 4 million in low- and middle-income countries. The addition of improved access to nicotine replacement therapy and other interventions would help an additional 6 million people to quit and save 1 million lives.
Costs
Despite their shorter lifespan, smokers appear to incur higher health care costs than non-smokers. In high-income countries, the treatment of tobacco-related diseases swallows up an 6-15 percent of annual spending on health. In both high-income countries and some low-income countries, as much as 1 percent of GDP is spent on health care for smokers.
A package of tobacco control measures can be delivered at very low cost, argues the study. In high-income countries, comprehensive control programmes account for 0.1 percent-1 percent of public spending on health-an affordable proportion even in low-income countries where public spending on health is lower.
Restrictions on supply
Efforts to reduce the supply of cigarettes have been largely ineffective. Prohibition and trade embargoes are unrealistic, while attempts to restrict cigarette sales to teenage smokers have usually been unsuccessful, even in countries with substantial enforcement capacity. Elsewhere, crop substitution schemes have also failed, largely because of stronger financial incentives to grow tobacco.
For more information, please visit www.worldbank.org/tobacco/ or www.who.int/toh/.