A word of advice from the World Bank on tobacco tax
Governments should consider the role of tobacco taxes in weathering the current financial storm, say two World Bank experts in a recent blog post. Such “corrective taxes” can generate positive social benefits and raise much needed revenue.
Authors Patricio V Marquez and Blanca Moreno-Dodson note that it’s widely accepted that raising tobacco taxes is one of the most cost-effective ways to cut tobacco consumption and save lives, as long as the increase is large enough to offset growth in real incomes, reducing affordability.
Lower rates in low-mid income countries
The authors state that tobacco excise tax rates in low- and middle-income countries are generally much lower than in high-income ones. “This shows that low- and middle-income countries can increase their excise taxes further to effectively make cigarettes more expensive, reduce consumption, and mobilize fiscal revenue,” they argue.
That revenue could be used to pay for essential services, suggest the authors. “Strong tax administration is critical to minimize tax avoidance and tax evasion.” At the same time, governments must resist interference from the tobacco industry.
Addis Ababa agenda an opportunity
In 2015 United Nations member states adopted the Addis Ababa Action Agenda on financing for development. It recommended that governments raise tobacco taxes, a key measure in the WHO Framework Convention on Tobacco Control (FCTC), to fight tobacco use, help defer health care costs, and raise revenue.
The Agenda provides a window of opportunity, write the bloggers. “In times of crises, unconventional measures help.
“So, let’s make sure to include tobacco taxation as part of the policy arsenal for countries to use to deal with the stark new reality of budget shortfalls and faltering economic growth, while contributing to keeping the population healthy by controlling a preventable disease risk factor.”
This article was first published on February 10, 2016 on the FCTC’s website.