advancing action on the implementation of …documents1.worldbank.org/curated/en/...this report was...

ADVANCING ACTION ON THE IMPLEMENTATION OF TOBACCO TAX HARMONIZATION IN THE ORGANIZATIONOF EASTERN CARIBBEAN STATES (OECS) COUNTRIES

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Cover photos (clockwise from left): Union Island Clifton Bay Grenadines Islands. Photo by happytrip / iStock. Woman in St. Kitts. Photo by Joel Carillet / iStock. Cigars concept on a box. Jorge Villalba / iStock. Castries Market, Saint Lucia. Photo by argalis / iStock.

ADVANCING ACTION ON THE IMPLEMENTATION OF TOBACCO TAX HARMONIZATION IN THE ORGANIZATION OF EASTERN CARIBBEAN STATES (OECS) COUNTRIES

II // Executive Summary

THE DATA ON TOBACCO1 USE IN THE ORGANIZATION OF EASTERN CARIBBEAN STATES (OECS) REVEAL HIGH LEVELS OF TOBACCO USE, BOTH AMONG ADULTS AND CHILDREN. THE TAX SYSTEMS OF THE

III

ACKNOWLEDGMENTS

This report was prepared by a team coordinated by Patricio V. Marquez, Lead Public Health Specialist, Health, Population and Nutrition Global Practice (HNP GP), World Bank Group (WBG), and including Althea La Foucade, Karl Theodore, Christine Laptiste, Ewan Scott, Samuel Gabriel, Charmaine Metivier, and Daren Conrad of the HEU, Centre for Health Economics, The University of the West Indies; and Alberto Gonima, Engineer and Modelling Consultant, WBG.

The team thanks Vyjanti Beharry, Kimberly-Ann Gittens-Baynes, Joshua Ramsammy and Cedrina Carr of the HEU, Centre for Health Economics, The University of the West Indies, and Earl Boodoo for the research assistance provided.

Valuable comments and suggestions were provided by an international group of peer reviewers:

Corne van Walbeek, Professor of Economics at the University of Cape Town, Principal Investigator of the Economics of Tobacco Control Project, and Director of the WHO FCTC Secretariat’s Knowledge Hub on Tobacco Taxation and Illicit Trade, Cape Town, South Africa

Julie Berthet Valdois, Research Officer in the Economics of Tobacco Control Project and Acting Manager of the WHO FCTC Secretariat’s Knowledge Hub on Tobacco Taxation and Illicit Trade, Cape Town, South Africa

Annerie Bouw, Legal Advisor, European Commission, Directorate-General Taxation and Customs Union, Brussels, Belgium

Santiago Herrera, Lead Economist, Macro Economics and Fiscal Management Global Practice, World Bank Group, Washington, D.C., United States.

Editing of the report was done by Elizabeth Baldwin, Economics of Tobacco Control Project, and WHO FCTC Secretariat’s Knowledge Hub on Tobacco Taxation and Illicit Trade, Cape Town, South Africa

The preparation of this report was carried out under the World Bank Group Global Tobacco Control Program coordinated by Patricio V. Marquez, with the support of the Bill & Melinda Gates Foundation and the Bloomberg Philanthropies.

Port of Spain, Trinidad & Tobago, and Washington, D.C., United States, June 2018


IV // Table of Contents

Advancing Action on the Implementation of Tobacco Tax Harmonization in the Organization of Eastern Caribbean States (OECS) Countries

TABLE OF CONTENTS

List of Tables VI

List of Figures VIII

List of Boxes IX

Executive Summary XI

1. Tobacco Use Prevalence and Consumption Trends in OECS Countries 2

2. The Tobacco Market in OECS Member States 6

2.1. Sources of Cigarette Imports for the OECS 6

2.2. Trend in Cigarette Imports 8

2.3. Price Analysis Sampling Process 9

3. Current Tobacco Control Policies in OECS Member Countries 16

4. Tobacco Tax System, Tax Structures and Excise Tax Burden OECS Member States 24

5. Modelling the Fiscal Impact of Tobacco Tax Policy Reforms in OECS Member States 28

5.1. Tobacco Excise Tax – Modeling Harmonization Simulation Framework 28

5.2. Increasing Specific Excise Taxes as OECS Tobacco Harmonization: Best Practice 28

5.3. Expected Benefit of Increasing Tobacco Tax Rates 29

5.4. Regional Cigarettes Excise Taxes Best Practices 29

5.4.1. European Union (EU) 29

5.4.2. The Economic Community of West African States (ECOWAS) 32

5.4.3. Southern African Customs Union (SACU) 32

5.5. Summary Cigarette Retail Price and Tax Burden Projections – 2010-2021 35

5.6. Impact Assessment of Tobacco Tax Increases in the Selected OECS Member Countries 39

5.6.1. Grenada Excise Tax- GDP Impact Assessment - 2018 Forecast, and Proposed Scenarios 41

VV

5.6.2. St. Lucia Excise Tax- GDP Impact Assessment - 2018 Forecast, and Proposed Scenarios 45

5.6.3. St. Vincent and the Grenadines Excise Tax- GDP Impact Assessment - 2018 Forecast, and Proposed Scenarios 49

5.6.4. Antigua and Barbuda Excise Tax- GDP Impact Assessment - 2018 Forecast, and Proposed Scenarios 53

5.6.5. St. Kitts Excise Tax- GDP Impact Assessment - 2018 Forecast, and Proposed Scenarios 57

6. Conclusions and the Way Forward 62

6.1. Conclusions 62

6.2. The Way Forward 63

References 66

Annex 1 to 3: OECS Excise Tax Harmonization: Simulation Assumptions 68

VI // Table of Contents


LIST OF TABLES

Table 1.1: Smoking Prevalence and Deaths in the OECS 3

Table 2.1: Distribution of Sample of Establishments by Country 9

Table 2.2: WHO Most Sold Brand of Cigarettes in OECS Countries (2016) 10

Table 2.3: Price Ranges per Pack of 20s and 10s Cigarettes, Selected OECS Countries 10

Table 2.4: Retail Price Ranges of 20 Sticks Pack of Cigarettes by Market Segment, by Country 11

Table 2.5: Affordability of Tobacco Purchase in OECS Countries and Trinidad and Tobago (2008-2016) 12

Table 3.1: Summary of Tobacco Measures and Policies OECS Countries 17

Table 3.2: Establishment of Government Tobacco Controls in the OECS 18

Table 3.3: Tax and Licensing Information 19

Table 3.4: Tobacco Control Acts/Measures 20

Table 3.5: Legislative Controls as at 2016 21

Table 4.1: Tax Rates and Tax Bases in Selected OECS Countries 25

Table 4.2: Tax Revenues from Tobacco Products OECS Countries 26

Table 5.1: OECS Excise Tax Harmonization: Summary Cigarette Retail Price and Tax Burden Projections - Simulation Policy Option 1 - Scenario 1 Outputs 2017 – 2021 36

Table 5.2: OECS Excise Tax Harmonization: Summary Cigarette Retail Price and Tax Burden Projections – Simulation Policy Option 2 - Scenario 2 Outputs 2017 – 2021 38

Table 5.3: Proposed OECS Tobacco Excise Tax Harmonization Schedule 2019-2025 39

Table 5.4: Grenada Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021 43

Table 5.5: Grenada Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option 2 (Scenario 2) Outputs 2019-2021 44

Table 5.6: St. Lucia Summary Cigarette Excise Tax GDP Impact 2017, 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2020 47

Table 5.7: St. Lucia Summary Cigarette Excise Tax GDP Impact 2017, 2018 Forecast, and Proposed, Policy Option 2 (Scenario 2) Outputs 2019-2021 48

Table 5.8: St. Vincent and the Grenadines Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021 51

VII

Table 5.9: St. Vincent and the Grenadines Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option (Scenario 2) Outputs 2019-2021 52

Table 5.10: Antigua and Barbuda Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021 55

Table 5.11: Antigua and Barbuda Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option 2 (Scenario 2) Outputs 2019-2021 56

Table 5.12: St. Kitts and Nevis Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021 59

Table 5.13: St. Kitts and Nevis Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option 2 (Scenario 2) Outputs 2019-2021 60

Annex I - Table 1: OECS Macro-Economic Indicators 69

Annex II - Table 1: OECS Excise Tax Harmonization: Simulation Assumptions: Price (-0.6/-0.4 range) and Income Elasticity (0.9/0.5 range) for Upper Middle-Income Countries (UMIC) 71

Annex II - Table 2: OECS Excise Tax Harmonization: Price (-0.5/-0.3 range) and Income Elasticity (0.8/0.4 range) for High Income Countries 73

Annex III - Table 1: OECS Excise Tax Harmonization: Grenada Tax Scenarios – Current and Proposed Scenarios: Cigarette Excise Tax Structure Actual 2016-2017 & Forecast 2018 - 2021 75

Annex III - Table 2: OECS Excise Tax Harmonization: St. Lucia Tax Scenarios – Current and Proposed ScenariosCigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021 76

Annex III - Table 3: OECS Excise Tax Harmonization: St. Vincent and the Grenadines Tax Scenarios – Current and Proposed Scenarios Cigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021 77

Annex III - Table 4: OECS Excise Tax Harmonization: Antigua and Barbuda Tax Scenarios – Current and Proposed Scenarios Cigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021 78

Annex III - Table 5: OECS Excise Tax Harmonization: St. Kitts and Nevis Tax Scenarios – Current and Proposed Scenarios Cigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021 79

VIII // Table of Contents


LIST OF FIGURES

Figure 2.1: Sources of Cigarette Imports into the OECS (2017) 7

Figure 2.2: Cigarette Imports from Caribbean Countries (2017) 8

Figure 2.3: Trend in Cigarette Imports in the OECS 9

Figure 2.4: Cigarette Affordability (OECS and Trinidad and Tobago) 12

IX

LIST OF BOXESBox 5.1: ETobacco Taxation in European Union 30

Box 5.2: ECOWAS Tobacco Excise Tax Structure 32

Box 5.3: Tax Harmonization in SACU Region 33

Box 5 4: Tobacco Price and Income Elasticity Ranges selected for HIC and UMIC 40

Box 6.1: Lessons Learned from the Tobacco Tax Harmonization in the SouthernAfrican Customs Union (SACU) 64

X // Executive Summary


XI

EXECUTIVE SUMMARY

The data on tobacco1 use in the Organization of Eastern Caribbean States (OECS) reveal

high levels of tobacco use, both among adults and children. The tax systems of the

OECS countries are heterogeneous, with a wide range of rates and bases over five main

categories of tax. This heterogeneity must be addressed if the tax systems of the OECS are

to be harmonized successfully.

This study analyses the tax systems of five OECS countries (Antigua and Barbuda,

Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines). Taxes

on tobacco, and therefore cigarette prices, vary widely across the five countries,

and smuggling and tax evasion are genuine risks. The study assesses two possible

harmonization scenarios, to estimate the possible impact of tobacco tax policy measures

on tobacco use, and at the same time to expand the fiscal capacity of OECS governments

through the mobilization of domestic resources. The simulations are modelled using the

harmonization policies adopted at the OECS treaty of Basseterre.2 Comparisons are also

made with other customs unions to identify regional best practices.

The simulations assess the feasibility of alternative tax systems and their probable impact

on both government revenue and reducing cigarette consumption. The two alternatives

are centred on adding a specific excise tax to the existing ad valorem excise tax (Scenario

1) or adopting a harmonized uniform specific excise tax (Scenario 2).

The assessment shows that that, although Scenario 2, which uses gradually-phased tax

increases, would generate a lower reduction in the total number of cigarettes taxed,

implying a lower reduction in consumption, it is the preferred option. This is because it

reaches a harmonized tax system more completely than Scenario 1, and would still lead

to a reduction in overall cigarette consumption and a significant increase in tobacco tax

revenue, albeit in the longer term. By doing so, it will also reduce the incentive for cross-

country trade in tobacco.

This study is focused on the harmonization of excise taxes across the OECS sub-region,

although the simplification of all taxes across the sub-region may also be desirable.

Although the proposed scenarios do not achieve the goal of bringing the OECS countries

into full compliance with the tobacco tax burden benchmarks set by the WHO and FCTC,

they do provide a starting point.

1 The focus of the study is cigarettes. 2 OECS. Revised treaty of Basseterre establishing the Organisation of Eastern Caribbean States Economic Union. 2010; 1–43


2

TOBACCO USE PREVALENCE AND CONSUMPTION TRENDS IN OECS COUNTRIES

As tobacco use rises steadily worldwide, statistics show that more than 80% of the world’s

smokers live in low- and middle-income countries (WHO 2018). The tobacco burden

seems to be shifting to the developing world while smoking prevalence has been

decreasing in high-income countries. In the Organisation of Eastern Caribbean States

(OECS), the most commonly used tobacco product is cigarettes, which puts a strain on

the health of the future labour force and productivity levels, and increases the associated

economic costs (The World Bank 2017).

In 2016, the Pan American Health Organization’s (PAHO) report on Tobacco Control for

the Americas estimated that general tobacco prevalence in the region of the Americas

was 17.1% in adults. However, the report also cited that a “lack of current national and

regional data on tobacco use and prevalence is a major obstacle in measuring the impact of

tobacco use in the CARICOM3 countries” (HCC, 2016) and, by extension, the OECS countries.

The Strategic Plan of Action for the Prevention and Control of NCDs (CARICOM3, 2011)

recorded that, in the Caribbean, smoking prevalence ranged from 10% to 27% in adults

and 10% to 25% in teenagers.

The data on the daily prevalence of tobacco use in the OECS, as seen in Table 1.1, reveal

that in all countries tobacco use by adult females was relatively low. The highest levels of

prevalence of daily tobacco smoking generally were among adult males, with St. Lucia

reporting 16% and St. Vincent and the Grenadines, 12%. For 2016, Grenada recorded the

highest percentage of deaths caused by tobacco for both males (10%) and females (5%).

Against the backdrop of harmonizing tobacco taxes and working to achieve a reduction

in smoking prevalence in the OECS, it must be noted that in St. Lucia, Grenada, and

Dominica, the prevalence of daily tobacco use among male children is close to 1%. In St.

Kitts and Nevis, the Global Youth Tobacco Survey reported that current cigarette smoking

by male and female children was 4.8% and 3.2%, respectively.

1

3 Caribbean Community.



3 // Tobacco Use Prevalence and Consumption Trends in OECS Countries

COUNTRY ADULT SMOKING PERCENTAGE USING TOBACCO DAILY2015

CHILDREN SMOKING PERCENTAGE USING TOBACCO DAILY2015

PERCENTAGE OF DEATHS CAUSED BY TOBACCO2016

Male Female Male Female Male Female

Antigua and Barbuda 4.97 2.45 0.38 0.56 4.73 2.53

Dominica 7.34 1.29 0.76 0.55 8.46 3.65

Grenada 11.4 2.73 0.79 0.66 9.92 4.64

St. Kitts and Nevis+ 11.4 0.7 4.8 3.2

St. Lucia 16.04 1.96 1.11 0.42 9.16 3.96

St. Vincent and the Grenadines 12.02 1.99 0.59 0.39 9.2 3.98

Table 1.1: Daily Smoking Prevalence and Deaths in the OECS

Source: Tobacco Atlas, 20184; +St. Kitts - Adult Data STEPS Survey 2007-8; Children Data ages 13-15: Current Cigarette Smoking Global Youth Tobacco Survey, 2010.

4 https://tobaccoatlas.org/.

https://tobaccoatlas.org/


4

6

THE TOBACCO MARKET IN OECS MEMBER STATES

The tobacco products sold in the OECS are both imported and locally manufactured.

There are at least three manufacturers of cigarettes in the OECS countries. Montobacco

Limited, which is located on the island of Montserrat, manufactures three brands of

cigarettes: Natural Marley Spirit®, Natural Marley Spirit Marijuana®, and 999.9 “Pure Virginia

Gold®”, all of which are manufactured for the export market (the company is not allowed

to sell its product in Montserrat), including some markets within the OECS and wider

CARICOM. Another cigarette manufacturer, Jas Garraway & Company Limited, located in

Dominica, is the maker of the Hillsborough brand of cigarettes, which is also sold within

the region. In St. Vincent and the Grenadines, the St. Vincent Manufacturing Company

Limited re-emerged in the market in 2017, with some limited manufacturing done

locally. The company produces the Empire brand of cigarettes. While there is some OECS

sub-regional production, most of the cigarettes sold and consumed are imported from

outside the OECS.

2.1. Sources of Cigarette Imports for the OECSData gathered from Trade Map5 and UN Comtrade6 indicate that cigarettes are imported

into the OECS sub-region from many parts of the world including Asia (1%), South and

Central America (24% and 1%, respectively), Europe (5%) and North America (8%).

By far the largest share (61%)7of the cigarettes sold in the sub-region is supplied by

Caribbean and CARICOM countries; of that total, Trinidad and Tobago accounts for 91.9%,

followed by the Dominican Republic (5%). See Figure 2.2. This means that most of the

cigarettes imported into the sub-region are not subject to import duties, but are subject

to a Common External Tariff (CET), since the OECS market operates within the framework

of the wider CARICOM. Article 32 of the Treaty of Chaguaramas, which established the

CARICOM, requires member countries are to adopt a CET of a specified range, based

on the harmonized commodity description and coding system. Furthermore, Article 84

of the Revised Treaty 2001, which established the Caribbean Community including the

Single Market and Economy, states that “goods that have been consigned from one Member

2

5 https://www.trademap.org/Index.aspx. 6 https://comtrade.un.org/. 7 The figure does not include imports from Montserrat owing to the unavailability of data.


https://www.trademap.org/Index.aspx

https://comtrade.un.org/


7 // The Tobacco Market in OECS Member States

Figure 2.1: Sources of Cigarette Imports into the OECS (2017)

8%

24%

1%

1%

5%

61%

0%

North America

Central America

Asia

South America

Europe

Areas not specifiedCarribean / CARICOM

Source: UN Comtrade 2018; Trade Map 2018

State to a consignee in another Member State shall be treated as being of Community origin.”

When this and other qualifying conditions are met, such goods may be exempt from

import duties. The provisions of these articles also apply to cigarettes and other tobacco

products that meet the conditions outlined.

In the sub-region, smokers have a relatively wide selection of cigarette brands from which to

choose. In addition to the brands listed above, the West Indian Tobacco Company (WITCO),

the main supplier of cigarettes in the region, supplies 10 different brands of cigarettes to the

OECS. These include Benson & Hedges, Dunhill, Kool, Newport, Silk Cut, Viceroy, Embassy,

Pall Mall, and Du Maurier. Other brands imported from outside the region include L &M,

Marlboro, Pine, Camel, State Express 555, Phoenix (a Grenadian brand produced in Trinidad

and Tobago), and Popular. Many of these brands are manufactured by some of the world’s

biggest tobacco companies, including RJ Reynolds Tobacco Company, Phillip Morris USA

Inc., ITG Brands, and British American Tobacco Company.


8

Figure 2.2: Cigarette Imports from Caribbean Countries (2017)

1% 1%1%

5%

92%

Saint Maarten (Dutch Part)

Dominican Republic

Trinidad and Tobago

Suriname

Dominica


8 Customs and Excise Departments, OECS countries, UN Comtrade, Trade Map and HEU Estimates. 9 Where data is presented in kilograms, a conversion of 1 gram of tobacco per stick was used.

2.2. Trend in Cigarette ImportsData from various sources8 indicate that cigarette imports in the sub-region have fallen

steadily and substantially over the period 2014 - 2017. According to the data, imports

in 2017 fell 12.5% from a high in 2014 of 11.2 million packs of 20 sticks of cigarettes.9

Figure 2.3 shows that Grenada, St. Vincent and the Grenadines, and Antigua and Barbuda

experienced decreases in imports, while St. Lucia, registered steady growth during the

period. St. Kitts and Nevis saw a slight increase in imports between 2016 and 2017.



COUNTRY NUMBER OF ESTABLISHMENTS SAMPLED

NUMBER OF OBSERVATIONS

Antigua and Barbuda 21 92

Grenada 22 105

St. Kitts and Nevis 20 96

St. Lucia 31 232

St. Vincent and the Grenadines 20 135

Table 2.1: Distribution of Sample of Establishments by Country

Source: HEU-UWI survey 2017

2.3. Price Analysis Sampling Process To undertake a price analysis of cigarettes in each of the selected countries in the sub-

region, samples were drawn that ensured adequate representation from each parish or

district and the inclusion of as many categories of establishments as possible. Among the

entities sampled were supermarkets, restaurants, bars, and restaurants with bars. The data

were collected over a two-week period in November 2017. In Grenada, 22 establishments

were sampled, 21 in Antigua, 20 in St. Kitts and Nevis, 31 in St. Lucia, and 20 in St. Vincent

Figure 2.3: Trend in Cigarette Imports in the OECS

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

12,000

10,000

8,000

6,000

4,000

2,000

COU

NTR

Y TO

TAL

(PAC

KS O

F 20

S)TH

OU

SAN

DS O

ECS TOTAL (PACKS O

F 20S)TH

OU

SAND

S

2014

2015

2016

2017

Antigua and Barbuda

St. Vincent and the GrenadinesSt. LuciaSt. Kitts and NevisGrenada

OECS Total



10

ANTIGUA AND BARBUDA

DOMINICA GRENADA ST. KITTS AND NEVIS

ST. LUCIA ST. VINCENT AND THE GRENADINES

Most sold brand of cigarette Du Maurier Hillsborough Du Maurier Benson &

Hedges Viceroy Du Maurier

Table 2.2: WHO Most Sold Brand of Cigarettes in OECS Countries (2016)

Source: WHO Report on the Global Tobacco Epidemic 2017.

and the Grenadines (see Table 2.1). Each retail entity was categorized based on its

registration description or its trading name description.

The price analysis was conducted only for the main brands used in each of the selected

OECS countries, since these are the brands that attract the greatest volume of sales. Table

2.2 shows the most-sold brands, in the countries selected, for the year 2016.

Of the countries surveyed in 2017, St. Lucia was shown to have the highest overall prices

for cigarettes. Across the selected countries, the price per pack of 20 cigarettes (full pack)

varied widely, ranging between EC$5.85 and EC$22.00 per pack in St. Lucia, which has the

highest prices, and between EC$4.00 and EC$9.20 in Antigua and Barbuda, which has the

lowest (Table 2.3). The result was similar for packs of 10 cigarettes (half pack), with the price

per pack ranging between EC$3.25 and EC$5.00 in St. Kitts and Nevis, and between EC$5.00

and EC$16.00 in St. Lucia. That St. Lucia has such high cigarette prices is to be expected, as

the country has been very aggressive about tobacco taxation, having the highest excise tax

share in the OECS and the second highest (after Jamaica) in the CARICOM.

COUNTRIES PRICE RANGES (PACK OF 20s, EC$)

PRICE RANGES (PACK OF 20s, USD)

PRICE RANGES (PACK OF 10s, EC$)

PRICE RANGES (PACK OF 10s, USD)

Antigua and Barbuda 4.00 - 9.20 1.48 - 3.41 3.95 - 4.75 1.46 - 1.76

Grenada 6.15 - 15.00 2.28 - 5.56 3.75 - 5.50 1.39 - 2.04

St. Kitts and Nevis 3.50 - 18.87 1.30 - 6.99 3.25 - 5.00 1.20 - 1.85

St. Lucia 5.85 - 22.00 2.17 - 8.15 5.00 - 16.00 1.85 - 5.93

St. Vincent and the Grenadines 4.00 - 20.00 1.48 - 7.41 3.50 - 6.00 1.30 - 2.22

Table 2.3: Price Ranges per Pack of 20 and 10 Cigarettes, Selected OECS Countries




PRICE RANGES OF 20 STICKS PACK OF CIGARETTES BY MARKET SEGMENT, BY COUNTRY (EC$)

Market Segment Antigua and Barbuda

Grenada St. Kitts and Nevis

St. Lucia St. Vincent and the Grenadines

Economy 4.00 - 5.50 6.15 - 6.50 3.50 - 7.00 5.85 - 8.80 4.00 - 6.90

Mid-Price 6.00 - 8.00 7.00 - 7.95 7.50 - 10.00 9.00 - 12.95 7.00 - 10.00

Premium 8.25 - 9.20 8.25 - 15.00 13.25 - 18.87 13.00 - 22.00 12.00 - 20.00

Table 2.4: Retail Price Ranges of 20 Sticks Pack of Cigarettes by Market Segment, by Country

Source: HEU-UWI survey 2017

10 Both OECS members are classified by the World Bank as high-income countries (World Bank list of economies June 2017).

The price per a pack of 20 cigarettes, for premium brands, ranged from EC$13.00 and

EC$22.00 in St. Lucia to between EC$8.25 and EC$9.20 in Antigua and Barbuda. In the

economy segment of the market, prices ranged between EC$5.85 and EC$8.80 in St.

Lucia and between EC$4.00 and EC$6.90 in St. Vincent and the Grenadines (See Table 2.4).

The observed variation can be explained. Generally, surveys in most of these countries

would include from 2 to 5 establishments. In most cases, these establishments would be

chosen from one category, usually supermarkets. Since these surveys do not consider

pack size and brand category (premium, mid-price, and economy), another survey was

needed. The survey conducted included a much wider range of categories such as bars,

restaurants, restaurant and bars combinations, and supermarkets. A minimum of twenty

establishments was chosen from every parish in every country. In the case of the national

surveys, establishments in many instances are chosen from just a few parishes. The different

sampling methods provide the most likely reason for the wider than usual price ranges.

Cigarettes remain affordable in the OECS member countries. Taxes (as a percentage of

the price) and excise duties remain relatively low in some places. Tobacco affordability,

as defined by the WHO in its Report on the Global Tobacco Epidemic 2017, is simply the

percentage of GDP per capita required to purchase 100 packs of the most-sold brand

of cigarettes—the higher the percentage of GDP, the less affordable the purchase of

tobacco. Of the seven countries represented in Table 2.5 and Figure 2.4, tobacco became

more affordable in 2016 in Antigua and Barbuda and St. Kitts and Nevis,10 compared to

2014. In the other five countries, the purchase of 100 packs of the most sold brand of

cigarettes became less affordable. Of these, there were three countries in which the most


12

COUNTRIES AFFORDABILITY

Percentage of GDP per capita required to purchase 100 packs

2016

2016 compared 2014

Between 2008 and 2016

Antigua and Barbuda 1.91 More affordable Less affordable

Dominica 2.17 less affordable Little change

Grenada 3.32 less affordable less affordable

St. Kitts and Nevis 1.85 More affordable less affordable

St. Lucia 4.2 less affordable less affordable

St. Vincent and the Grenadines 3.16 less affordable Little change

Trinidad and Tobago 2.54 less affordable less affordable

Table 2.5: Affordability of Tobacco Purchase in OECS Countries and Trinidad and Tobago (2008-2016)


Figure 2.4: Cigarette Affordability (OECS and Trinidad and Tobago)

4

3

2

1

0

Antigua and Barbuda

Dominica Grenada St. Kitts and Nevis

St. Lucia Trinidad and Tobago

St. Vincent and the

Grenadines

2008 2012 20162010 2014

PERC

ENTA

GE

OF

GD

P PE

R CA

PITA

RE

QU

IRED

TO

PU

RCH

ASE

100

PACK

S

Source: WHO Report on the Global Tobacco Epidemic 2017



sold brand of cigarettes was significantly less affordable: Trinidad and Tobago, St. Lucia,

and St. Vincent and the Grenadines. In the case of Dominica and Grenada, the most sold

brand of cigarettes became slightly less affordable.

In St. Kitts and Nevis and St. Vincent and the Grenadines, the most-sold brand of cigarettes

became increasingly less affordable between 2008 and 2012. In four of the seven countries

(Dominica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines), 2012 was the

year in which the most-sold brand of cigarettes was least affordable.


14

16

CURRENT TOBACCO CONTROL POLICIES IN OECS MEMBER COUNTRIES

Despite the best efforts of educators and health practitioners to discourage the use of

tobacco, only governments can stop the commercial promotion of the use of tobacco

(Musgrove et al., 2000). It is widely acknowledged that tobacco consumption imposes

significant burdens on societies in the form of high health care costs for tobacco-

related illnesses and the loss of labour productivity, both of which have the potential to

undermine social and economic development. Consequently, it has become imperative

for countries to reduce tobacco consumption as part of their overarching sustainable

development plans.

To curb cigarette consumption, countries generally move towards the implementation

of comprehensive tobacco control measures, which usually include a mix of taxation,

education and legislation. The inclusion of the World Health Organisation’s Framework

Convention on Tobacco Control (WHO FCTC) in development plans is key to recognizing

and controlling the smoking epidemic. The OECS member countries have all been

engaged in implementing measures to control tobacco consumption. These policies

include taxation, licensing, and the implementation of the WHO FCTC.

Table 3.1 provides a summary of tobacco control measures and policies in OECS countries.

The WHO FCTC reported that, as of 2016, Grenada, St. Lucia, and St. Vincent and the

Grenadines have recent and representative data on both adults and youths. However,

OECS countries have implemented limited smoke-free policies in one or two public places

and, in the case of St. Lucia and Grenada, some cessation programmes, of which at least

one is cost-covered. These countries have not yet included warnings of health risks on

their packaging and, except for Antigua and Barbuda, there have been no known national

anti-tobacco campaigns between 2014 and 2016.

3



17 // Current Tobacco Control Policies in OECS Member Countries

MEA

SURE

SAN

TIG

UA

AND

BA

RBU

DA

DO

MIN

ICA

GRE

NAD

AST

. KIT

TS A

ND

N

EVIS

ST. L

UC

IAST

. VIN

CEN

T AN

D T

HE

GRE

NAD

INES

Mon

itorin

g:

Prev

alenc

e dat

a

No

know

n da

ta o

r no

rece

nt d

ata o

r da

ta th

at ar

e not

bo

th re

cent

and

repr

esen

tativ

e

No

know

n da

ta o

r no

rece

nt d

ata o

r da

ta th

at ar

e not

bo

th re

cent

and

repr

esen

tativ

e

Rece

nt an

d re

pres

enta

tive d

ata

for b

oth

adult

s and

yo

uth

No

know

n da

ta o

r no

rece

nt d

ata o

r da

ta th

at ar

e not

bo

th re

cent

and

repr

esen

tativ

e

Rece

nt an

d re

pres

enta

tive d

ata

for b

oth

adult

s and

yo

uth

Rece

nt an

d re

pres

enta

tive d

ata

for b

oth

adult

s and

yo

uth

Smok

e-Fr

ee P

olici

es:

Polic

es on

smok

e-fre

e en

viron

men

ts

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Cess

atio

n Pr

ogra

mm

es:

Trea

tmen

t of t

obac

co

depe

nden

ce

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

NRT

11 and/

or so

me

cess

ation

serv

ices

(at l

east

one o

f wh

ich is

cost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(at l

east

one o

f wh

ich is

cost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

Hea

lth W

arni

ngs:

Hea

lth w

arni

ngs o

n cig

aret

te p

acka

ges

No

warn

ings

or

small

war

ning

sN

o war

ning

s or s

mall

wa

rnin

gsN

o wa

rnin

gs o

r sm

all w

arni

ngs

No

warn

ings

or

small

war

ning

sN

o wa

rnin

gs o

r sm

all w

arni

ngs

No

warn

ings

or

small

war

ning

s

Mas

s Med

ia:An

ti-to

bacc

o ca

mpa

igns

Nat

ional

cam

paign

co

nduc

ted

with

one

to

four

appr

opria

te

char

acte

ristic

s

Dat

a not

repo

rted

No

natio

nal

cam

paign

co

nduc

ted

betw

een

July

2014

and

June

20

16 w

ith d

urat

ion

of at

leas

t thr

ee

week

s

No

natio

nal

cam

paign

co

nduc

ted

betw

een

July

2014

and

June

20

16 w

ith d

urat

ion

of at

leas

t thr

ee

week

s

No

natio

nal

cam

paign

co

nduc

ted

betw

een

July

2014

and

June

20

16 w

ith d

urat

ion

of at

leas

t thr

ee

week

s

N/A

Adve

rtisin

g ban

s: Ba

ns on

adve

rtisin

g,

prom

otio

n an

d sp

onso

rshi

p

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Taxa

tion:

Sha

re of

to

tal t

axes

in th

e re

tail

price

of th

e m

ost s

old

bran

d of

cig

aret

tes

<= 2

5% o

f ret

ail

price

is ta

x<=

25%

of r

etail

pr

ice is

tax

26–5

0% o

f ret

ail

price

is ta

x<=

25%

of r

etail

pr

ice is

tax

51–7

5% o

f ret

ail

price

is ta

x<=

25%

of r

etail

pr

ice is

tax

Table 3.1: Summary of Tobacco Measures and Policies OECS Countries

Source: WHO Report on the Global Tobacco Epidemic, 201712

11 Abbreviation: Nicotine Replacement Therapy (NRT) 12 http://www.who.int/tobacco/surveillance/policy/country_profile/en/

http://www.who.int/tobacco/surveillance/policy/country_profile/en/


18

MEA

SURE

SAN

TIG

UA

AND

BA

RBU

DA

DO

MIN

ICA

GRE

NAD

AST

. KIT

TS A

ND

N

EVIS

ST. L

UC

IAST

. VIN

CEN

T AN

D T

HE

GRE

NAD

INES

Mon

itorin

g:

Prev

alenc

e dat

a

No

know

n da

ta o

r no

rece

nt d

ata o

r da

ta th

at ar

e not

bo

th re

cent

and

repr

esen

tativ

e

No

know

n da

ta o

r no

rece

nt d

ata o

r da

ta th

at ar

e not

bo

th re

cent

and

repr

esen

tativ

e

Rece

nt an

d re

pres

enta

tive d

ata

for b

oth

adult

s and

yo

uth

No

know

n da

ta o

r no

rece

nt d

ata o

r da

ta th

at ar

e not

bo

th re

cent

and

repr

esen

tativ

e

Rece

nt an

d re

pres

enta

tive d

ata

for b

oth

adult

s and

yo

uth

Rece

nt an

d re

pres

enta

tive d

ata

for b

oth

adult

s and

yo

uth

Smok

e-Fr

ee P

olici

es:

Polic

es on

smok

e-fre

e en

viron

men

ts

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Com

plete

abse

nce

of b

an, o

r up

to

two

publi

c plac

es

com

plete

ly sm

oke-

free

Cess

atio

n Pr

ogra

mm

es:

Trea

tmen

t of t

obac

co

depe

nden

ce

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

NRT

11 and/

or so

me

cess

ation

serv

ices

(at l

east

one o

f wh

ich is

cost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(at l

east

one o

f wh

ich is

cost-

cove

red)

NRT

and/

or so

me

cess

ation

serv

ices

(neit

her c

ost-

cove

red)

Hea

lth W

arni

ngs:

Hea

lth w

arni

ngs o

n cig

aret

te p

acka

ges

No

warn

ings

or

small

war

ning

sN

o war

ning

s or s

mall

wa

rnin

gsN

o wa

rnin

gs o

r sm

all w

arni

ngs

No

warn

ings

or

small

war

ning

sN

o wa

rnin

gs o

r sm

all w

arni

ngs

No

warn

ings

or

small

war

ning

s

Mas

s Med

ia:An

ti-to

bacc

o ca

mpa

igns

Nat

ional

cam

paign

co

nduc

ted

with

one

to

four

appr

opria

te

char

acte

ristic

s

Dat

a not

repo

rted

No

natio

nal

cam

paign

co

nduc

ted

betw

een

July

2014

and

June

20

16 w

ith d

urat

ion

of at

leas

t thr

ee

week

s

No

natio

nal

cam

paign

co

nduc

ted

betw

een

July

2014

and

June

20

16 w

ith d

urat

ion

of at

leas

t thr

ee

week

s

No

natio

nal

cam

paign

co

nduc

ted

betw

een

July

2014

and

June

20

16 w

ith d

urat

ion

of at

leas

t thr

ee

week

s

N/A

Adve

rtisin

g ban

s: Ba

ns on

adve

rtisin

g,

prom

otio

n an

d sp

onso

rshi

p

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Com

plete

abse

nce

of b

an, o

r ban

that

do

es n

ot co

ver

natio

nal t

elevis

ion,

radio

and

prin

t m

edia

Taxa

tion:

Sha

re of

to

tal t

axes

in th

e re

tail

price

of th

e m

ost s

old

bran

d of

cig

aret

tes

<= 2

5% o

f ret

ail

price

is ta

x<=

25%

of r

etail

pr

ice is

tax

26–5

0% o

f ret

ail

price

is ta

x<=

25%

of r

etail

pr

ice is

tax

51–7

5% o

f ret

ail

price

is ta

x<=

25%

of r

etail

pr

ice is

tax

ANTIGUA AND BARBUDA

DOMINICA GRENADA ST. KITTS AND NEVIS ST. LUCIA

ST. VINCENT AND THE GRENADINES

Specific national government objectives in tobacco control

No No Yes Yes Yes No

National agency or technical unit for tobacco control

No Yes Yes No Yes No

Table 3.2: Establishment of Government Tobacco Controls in the OECS


Three countries—Dominica, St. Vincent and the Grenadines, and Antigua and Barbuda,

do not have existing national government objectives for tobacco control (Table 3.2).

However, for the three that do have these objectives, there are no data available on the

specifics of each objective or its status, nor on the number of staff involved in tobacco

control measures and policies or how these policies will be implemented. Notably,

although the WHO FCTC recommends establishing a national agency or technical unit for

tobacco control, only Grenada, Dominica and St. Lucia have been successful in doing so.

In addition to introducing national policies, OECS member countries have also used

taxation to address the issue of tobacco consumption (See Table 3.3).

In terms of implementing the WHO FCTC, the United Kingdom Overseas Territories

(UKOT)—Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Montserrat, and the

Turks and Caicos Islands—fall under the aegis of the United Kingdom and therefore

cannot sign on to the Convention as individual countries. Nevertheless, to advance the

FCTC goals, the British Virgin Islands, the Cayman Islands, the Turks and Caicos Islands, and

Bermuda have passed Tobacco Control Laws. Bermuda’s Tobacco Control Act, which was

passed in 2015 and came into effect July 2016, makes it the most recent BOT to enact

tobacco control legislation. The other Territories have implemented some of the articles

of the FCTC. Specifically, they have implemented articles related to ensuring public

spaces are smoke-free, banning smoking inside restaurants, requiring tobacco dealers

to display health warnings at the point of sale for tobacco products, prohibiting tobacco

products from being displayed within reach of customers, requiring a display of health

warnings covering at least 30% of the principal display area of the tobacco packages, and

prohibiting vending machine sales of tobacco products.



ANTIGUA AND BARBUDA

DOMINICA GRENADA ST. KITTS AND NEVIS

ST. LUCIA ST. VINCENT AND THE GRENADINES

Type of excise applied N/A Specific Excise

Ad valorem excise

Ad valorem excise Specific excise Specific excise

Uniform excise tax applied Yes (uniform), No (tiered/varying rates)

N/A Yes Yes Yes Yes Yes

Minimum specific tax applied in ad valorem or mixed excise regime

N/A - No No N/A No

Retail price used as base of ad valorem component in ad valorem or mixed excise regime (or retail price exclusive of VAT)

N/A - No No N/A No

Specific tax component automatically adjusted for inflation (or other)

N/A … No No No No

Price dispersion: share of cheapest brand price in premium brand price (the higher the% the smaller the gap)

50% 39.27% 64.32% 65.46% 68.75% …

Tax stamps applied on tobacco products No No No No No No

Bans or limits on duty free imports by travelers Limited Limited Limited N/A Limited N/A

If duty free imports are limited, duty free allowance (number of cigarette sticks)

200 200 200 N/A 200 N/A

Table 3.3: Tax and Licensing Information

Source: Adapted from WHO Report on the Global Tobacco Epidemic, 2017


20

GRE

NAD

AST

. LU

CIA

ST. K

ITTS

AN

D N

EVIS

ST. V

INC

ENT

AND

TH

E G

REN

ADIN

ES

BRIT

ISH

VI

RGIN

IS

LAN

DS

ANG

UIL

LAAN

TIG

UA

AND

BA

RBU

DA

Toba

cco

Cont

rol A

ctN

oN

oN

oN

oYe

sN

oYe

s

Nam

e of A

ct-

--

-To

bacc

o Pr

oduc

ts Co

ntro

l Act

-Th

e Tob

acco

Co

ntro

l Act

Ch

apte

r 430

Trea

ty

Agre

emen

t

Wor

ld H

ealth

O

rgan

izatio

n Fr

amew

ork

Conv

entio

n on

To

bacc

o Co

ntro

l (W

HO

FC

TC)

Wor

ld H

ealth

O

rgan

izatio

n Fr

amew

ork

Conv

entio

n on

To

bacc

o Co

ntro

l (W

HO

FC

TC)

Wor

ld H

ealth

O

rgan

izatio

n Fr

amew

ork

Conv

entio

n on

To

bacc

o Co

ntro

l (W

HO

FC

TC)

Wor

ld H

ealth

O

rgan

izatio

n Fr

amew

ork

Conv

entio

n on

To

bacc

o Co

ntro

l (W

HO

FC

TC)

Wor

ld H

ealth

O

rgan

izatio

n an

d Pa

n Am

erica

n H

ealth

Org

anisa

tion

Wor

ld H

ealth

O

rgan

izatio

n Fr

amew

ork

Conv

entio

n on

Toba

cco

Cont

rol

(WH

O F

CTC

)

Year

of

Ratifi

catio

n20

0720

0520

1120

10-

-20

06

Prov

ision

s

- Pric

e and

ta

x mea

sure

s to

redu

ce th

e de

man

d fo

r to

bacc

o- P

rote

ction

fro

m ex

posu

re to

to

bacc

o sm

oke

- Pac

kagin

g an

d lab

eling

of

toba

cco

prod

ucts

- Tob

acco

ad

verti

sing,

prom

otion

, and

sp

onso

rship

- Dem

and

redu

ction

m

easu

res

conc

erni

ng

toba

cco

depe

nden

ce an

d ce

ssat

ion

- Pric

e and

tax

mea

sure

s to

redu

ce th

e dem

and

for t

obac

co- P

rote

ction

fro

m ex

posu

re to

to

bacc

o sm

oke

- Pac

kagin

g and

lab

eling

of t

obac

co

prod

ucts

- Tob

acco

ad

verti

sing,

prom

otion

and

spon

sorsh

ip- D

eman

d re

duct

ion

mea

sure

s co

ncer

ning

to

bacc

o de

pend

ence

and

cess

ation

- Pric

e and

ta

x mea

sure

s to

redu

ce th

e de

man

d fo

r to

bacc

o- P

rote

ction

fro

m ex

posu

re to

to

bacc

o sm

oke

- Pac

kagin

g an

d lab

eling

of

toba

cco

prod

ucts

- Tob

acco

ad

verti

sing,

prom

otion

and

spon

sorsh

ip- D

eman

d re

duct

ion

mea

sure

s co

ncer

ning

to

bacc

o de

pend

ence

and

cess

ation

- Pric

e and

ta

x mea

sure

s to

redu

ce th

e de

man

d fo

r to

bacc

o- P

rote

ction

fro

m ex

posu

re to

to

bacc

o sm

oke

- Pac

kagin

g an

d lab

eling

of

toba

cco

prod

ucts

- Tob

acco

ad

verti

sing,

prom

otion

and

spon

sorsh

ip- D

eman

d re

duct

ion

mea

sure

s co

ncer

ning

to

bacc

o de

pend

ence

and

cess

ation

-Pac

kagin

g-A

dver

tisin

g-P

rom

otion

-Dist

ribut

ion

-Red

uce a

fford

abilit

y of

toba

cco

prod

ucts

by in

crea

sing

toba

cco

excis

e tax

es

- Cre

ate b

y law

co

mple

tely

smok

e-fre

e env

ironm

ents

in al

l indo

or

work

place

s, pu

blic

place

s and

pub

lic

trans

port

- War

n pe

ople

of th

e da

nger

s of t

obac

co

and

toba

cco

smok

e th

roug

h eff

ectiv

e he

alth

warn

ings

an

d m

ass m

edia

cam

paign

s -B

an al

l for

ms o

f to

bacc

o ad

verti

sing,

prom

otion

and

spon

sorsh

ip

Table 3.4: Tobacco Control Acts/Measures13

Source: WHO Report on the Global Tobacco Epidemic, 2017.

11 Various Ministry Websites.



Table 3.5: Legislative Controls as at 2016

GRENADA ST. LUCIA ST. KITTS AND NEVIS


ANTIGUA AND BARBUDA

Type of tobacco warnings

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Does the law mandate that health warnings appear on tobacco packages?

No No No No No No No No No No No No No No No

Are there any laws requiring that tobacco packaging and labelling do not use misleading terms which imply the product is less harmful than other similar products, such as “low tar”, “light”, “ultra-light”, or “mild”?


Are there any laws requiring that tobacco packaging and labelling do not use figurative or other signs, including colours or numbers, as substitutes for prohibited misleading terms and descriptors?


Are there any laws requiring that tobacco packaging and labelling do not use descriptors depicting flavours?


Does the law ban the display of quantitative information on emission yields (such as tar, nicotine and carbon monoxide) on tobacco packaging, including when used as part of a brand name or trademark?


Does the law mandate the display of qualitative information on relevant constituents and emissions of tobacco products on tobacco packaging?



22

Table 3.5: Legislative Controls as at 2016

Source: WHO Report on the Global Tobacco Epidemic, 2017.

GRENADA ST. LUCIA ST. KITTS AND NEVIS


ANTIGUA AND BARBUDA

Type of tobacco warnings

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Ciga

rette

s

Oth

er sm

oked

to

bacc

o

Smok

eless

to

bacc

o

Does the law prevent the display of expiry dates on tobacco packaging?


Is it mandatory for the quit line number to appear on packaging or labelling?


Does the law mandate plain packaging (i.e. prohibit the use of logos, colours, brand images or promotional information on packaging other than brand names and product names displayed in a standard colour and font style)?


Table 3.4 provides a comprehensive review of the specific Tobacco Control Act elements

implemented in Grenada, St. Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, the

British Virgin Islands, and Antigua and Barbuda to advance the FCTC goals. In the absence

of their own Tobacco Control Acts, these countries have adopted, and in some instances

ratified, FCTC measures with various provisions.

From Table 3.5, it is evident that while many legislative measures have not yet been

implemented, there is certainly movement towards implementation of the elements of

the FCTC measures, to curb tobacco consumption.

24

TOBACCO TAX SYSTEM, TAX STRUCTURES AND EXCISE TAX BURDEN OECS MEMBER STATES

There are five main categories of tobacco taxes in effect in the selected member

countries of the OECS—import duty/common external tariff, excise tax, value added

tax, customs service charge, and revenue recovery charge (Table 4.1). Annex III provides

further details of OECS members’ current cigarette excise tax structures. Most notably,

there are different rates at which these tobacco taxes are imposed. The heterogeneity of

the tobacco tax systems and structures in the OECS must be addressed if the tobacco

taxes in the OECS are to be harmonized successfully. The analysis of the tobacco tax

structure excludes Dominica.

In the countries for which the tax analysis was conducted (Antigua and Barbuda,

Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines), import duties

are generally applied as ad valorem taxes on a base of Cost Insurance and Freight (CIF)

value, except in the case of St. Kitts and Nevis, which applies a specific import duty on

cigarettes of EC$18 per kilogram. Excise taxes vary widely, both by type and in terms of

rates. While Grenada and St. Kitts and Nevis levy an ad valorem excise tax of 20% and

105%, respectively, St. Vincent and the Grenadines and St. Lucia apply specific excise taxes

that are equivalent to EC$15.5 and EC$176 per thousand sticks, respectively. Meanwhile,

Antigua and Barbuda levy no excise taxes on cigarettes at all. Moreover, Customs

Service Charge (CSC) is applied in all countries except Antigua and Barbuda, which has

implemented a Revenue Recovery Charge of 10% of CIF value. Value Added Tax (VAT)

rates of 12% (St. Lucia), 15% (Grenada, Antigua and Barbuda), 16% (St. Vincent and the

Grenadines) and 17% (St. Kitts and Nevis), are also levied on tobacco products across the

countries. The Import Duties and VAT have the least variance among countries (Table 4.1).

Table 4.2 presents a snapshot of tax revenues from tobacco products for OECS countries

for 2015, except for St. Kitts and Nevis for which the data presented are for 2013. For

Grenada, excise taxes contribute 72% of total tax revenue from tobacco products, while

St. Lucia in they amount to 77%. Both countries outstrip other OECS states in terms of

overall revenues collected.

4



25 // Tobacco Tax System,Tax Structures and Excise Tax Burden OECS Member States

TAXE

SAN

TIG

UA

& BA

RBU

DA

(201

7)G

REN

ADA

(201

7)ST

. KIT

TS A

ND

NEV

IS

(201

7)ST

. LU

CIA

(201

7)ST

. VIN

CEN

T AN

D T

HE

GRE

NAD

INES

(201

7)

Rate

Base

Rate

Base

Rate

Base

Rate

Base

Rate

Base

Impo

rt D

uty

(ID)/C

ET

35%

- ciga

rette

s(R

ate e

ffect

ive

prior

to 2

011)

C.I.

F.

35%

- ciga

rette

s5%

- to

bacc

o(R

ate e

ffect

ive

prior

to 2

011)

CIF

EC$1

8 -

cigar

ette

s(R

ate e

ffect

ive

prior

to 2

008)

per k

g

5% -

stem

med

/str

iped

toba

cco

45%

- ciga

rs,

cigar

ette

s, an

d ot

her f

orm

s of

toba

cco

and

toba

cco

prod

ucts.

(Rat

e effe

ctive

pr

ior to

201

1)

CIF

35%

- Ciga

r and

cig

aret

tes

5% -

raw

toba

cco

Rate

effec

tive

prior

to 2

011)

CIF

Excis

e Tax

105%

- cig

aret

tes

(Rat

e effe

ctive

20

14)

CSC

+ C

ET+

CIF

20%

- cig

aret

tes

(Rat

e effe

ctive

pr

ior to

201

4)

CSC

+ ID

EC$1

76 p

er

1,000

Stic

ks o

n cig

aret

tes

EC$1

25.6

0 pe

r kg

on

cigar

s and

ot

her t

obac

co

prod

ucts.

(Rat

e effe

ctive

20

13)

14%

- ciga

rsEC

$1.5

5 pe

r 10

0 cig

aret

tes

6% ra

w to

bacc

o12

% ot

her

6% -

toba

cco

subs

titut

e(R

ate e

ffect

ive

2012

)

ID

+CIF

Valu

e Ad

ded

Tax

15%

(Rat

e effe

ctive

pr

ior to

201

1)C

IF+I

D15

%(R

ate e

ffect

ive

prior

to 2

011)

EXT+

C

SC

+CET

+ C

IF

17%

(Rat

e effe

ctive

20

10)

EXT+

CSC

+ ID

12%

(Rat

e effe

ctive

20

17)

EXT

+CSC

+ ID

+CIF

16%

(Rat

e effe

ctive

20

17)

CSC

+ EX

T+

ID

+CIF

Cust

oms

Serv

ice

Char

ge

6%(R

ate e

ffect

ive

prior

to 2

011)

CET

+ C

IF

6%(R

ate e

ffect

ive

prior

to 2

014)

ID6%

(Rat

e effe

ctive

20

15)

ID+C

IF5%

(Rat

e effe

ctive

20

17)

EXT+

ID

+C

IF

Oth

er

taxe

s (R

RC)

10%

(Rat

e effe

ctive

pr

ior to

201

1)C

IF

Table 4.1: Tax Rates and Tax Bases in Selected OECS Countries

Notes: CET - Common External Tariff, CSC - Customs Service Charge, CIF - Cost Insurance and Freight, RRC - Revenue Recovery Charge, EXT: Excise Tax, ID – Import Duty

Source: Statistical offices and Customs and Excise Divisions of OECS countries.


26

COUNTRIES

ST. KITTS AND NEVIS


GRENADA ST. LUCIA ANTIGUA AND BARBUDA

DOMINICA

Is tax revenue data for all tobacco products or cigarettes only?

All Tobacco Products






Year2013 2015 2015 2015 2015 2015

Currency XCD XCD XCD XCD XCD XCD

Total Excise1 220,269 705,427 8,178,933 9,905,000 - 354,846

VAT and other sales taxes 225,620 1,315,703 2,429,344 2,455,000 403,470 76,261

Import duties and all other taxes 2 209,788 524,106 810,112 521,000 515,123 98,381

Total 655,677 2,545,236 11,418,390 12,881,000 918,593 529,488

Table 4.2: Tax Revenues from Tobacco Products OECS Countries

Notes: 1Specific and ad valorem. 2 Excluding corporate taxes on tobacco companies. XCD: Eastern Caribbean Dollars


28

MODELING THE FISCAL IMPACT OF TOBACCO TAX POLICY REFORMS IN OECS MEMBER STATES

5.1. Tobacco Excise Tax - Modelling Harmonization Simulation FrameworkThe proposed simulations are being modeled within the harmonization policies adopted

by the OECS treaty of Basseterre,14 and the revised treaty Articles:

ũ Article 13.3 relates to the harmonization policies of the Economic Union;15

ũ Article 15.2 “Protocol Member States agree to the progressive harmonization of

their fiscal policies and fiscal incentives regimes”.

5.2. Increasing Specific Excise Taxes as OECS Tobacco Harmonization: Best PracticeThere is consensus that specific excise taxes, which are levied per pack of cigarettes as

opposed to net weight or other criteria, are the most efficient instruments to discourage

cigarette consumption (WHO 2015). Following regional best practices (e.g., EU, 16 SACU,

ECOWAS), the harmonized simulations assess the feasibility and impact of taxes on both

government revenue and consumption reduction for the selected OECS member states.

Alternatives include adopting a specific excise tax, increasing it when already in place, or

adopting a mixed system, adding a uniform specific excise tax to the existing ad valorem

excise tax.

Policy Option 1 (Scenario 1) builds on the excise tax structure status quo. It suggests

the implementation of a mixed system for countries that currently apply ad valorem

excise taxes, by adding specific excise taxes to the structure. Countries that already have

5

14 OECS. Revised treaty of Basseterre establishing the organisation of eastern Caribbean states economic union. 2010;1–43. 15 “13.3 This pursuit shall be linked to the harmonisation, consistent with the status of an Economic Union, of the following policy programme areas – (a) fiscal; (b) monetary; (c) trade; (d) international economic relations; (e) incomes; (f ) structural; (g) social; (h) envi-ronmental; and (i) other programme areas as identified by the OECS Authority. 16 The EU tobacco excise duty directive requires Member States to levy a minimum overall excise duty on cigarettes: At least €90 per 1000 cigarettes, and at least 60% of the weighted average retail selling price. Member states that apply an excise duty of €115 or more, however, do not need to comply with the 60% requirement.


29 // Modeling the Fiscal Impact of Tobacco Tax Policy Reforms in OECS Member States


specific excise taxes in place will only experience rate changes. For all countries, the

specific excise tax will be gradually increased to achieve an average excise tax burden of

at least 30% (i.e., excise tax as percentage of average retail price) by 2021.

Policy Option 2 (Scenario 2) presents a harmonized uniform specific excise tax of

EC$4.00 per 20-cigarette pack for OECS countries to adopt by 2021. This option assumes

gradual specific excise tax increases. Specific excise taxes are an effective measure to

reduce tobacco consumption. Policy Option 2 includes a full replacement of an ad

valorem with a specific excise tax where applicable (e.g., as in Grenada and St. Kitts and

Nevis) for government consideration. Annex III describes the current cigarette excise tax

structure and proposed scenarios for selected OECS members.

5.3. Expected Benefit of Increasing Tobacco Tax RatesTobacco taxes are distortionary taxes, which have a dual benefit: (i) reducing tobacco

use among current tobacco smokers, and harm to others from second-hand smoke,

and preventing initiation among the youth, thereby reducing the risk of tobacco-

related diseases that lead to ill health, premature mortality, and disability, and cost

health systems and individuals significant amounts of money for treating diseases that

are often preventable; and (ii) mobilizing additional domestic revenues to expand the

fiscal space and hence the capacity of the government to fund priority investments and

programmes that benefit the entire population (in accordance with the 2015 Financing

for Development Addis Ababa Action Agenda).

5.4. Regional Cigarettes Excise Taxes Best Practices

5.4.1. EUROPEAN UNION (EU)

In the European Union definitions of tobacco products, tax structures and minimum

excise duty rates are harmonized. Box 5.1 provides more information on the tobacco tax

harmonization within the European Union.

There are several levels on which the Member States of the European Union cooperate,

such as the political and economic level. All Member States of the European Union are

part of the European Union Customs Union. As a result, no custom duties on the trade in

goods between the Member States of the European Union are charged. In addition, in the

majority of the Member States the Euro is the official currency.

To ensure the proper functioning of the common market, some harmonization of fiscal

policies was needed. In the European Union the definitions of different types of tobacco

products are harmonized. The following categories are defined: cigarettes, cigarillos,

cigars, and smoking tobacco. In addition, a minimum rate and a tax structure have been

agreed at an EU level for each category. Member States are free to apply excise duty rates

above these minima, according to their national needs.

30


The legal provisions concerning tobacco excise duties in the European Union are laid

down in Directive 2011/64/EU on the structure and rates of excise duty applied to

manufactured tobacco (hereafter the Directive). The purpose of the Directive is to ensure

the proper functioning of the internal market and a high level of health protection.

Rates and structuresCigarettes - rates

The European obligatory minimum rates for cigarettes consist of two requirements:

a. The fixed minimum amount: EU countries should levy an excise duty of at least

€90 per 1000 cigarettes.

b. A relative minimum: the excise duty level in EU countries should be at least 60%

of the weighted average retail selling price of cigarettes (WAP).17

In principle, both requirements have to be met. However, derogation is possible from the

relative minimum of 60% if an EU country levies more than €115 per 1000 cigarettes.

17 According to Articles 8(2) and 14(2) of Council Directive 2011/64/EU the weighted average price (WAP) for cigarettes and fine-cut tobacco must be calculated by reference to the total value of all cigarettes/fine-cut tobacco released for consumption, based on the retail selling price, including all taxes, divided by the total quantity of cigarettes/fine-cut tobacco released for consumption, based on data relating to all such releases for consumption made in the preceding calendar year.

100

90

80

70

60

50

40

30

20

10

0

AT BE BG CY CZ

DE

DK EE EL ES FI FR HR

HU IE IT LT LU LV MT

NL PL PT RO SE SI SK UK

EXCISE DUTY BURDEN CIGARETTESJANUARY, 2018, IN % OF THE WEIGHTED AVERAGE PRICE

BOX 5.1: TOBACCO TAXATION IN EUROPEAN UNION



In 2017, the EU average excise duty level was approximately €146 per 1000 cigarettes, while

the average proportion between the excise duty and the weighted average price across

EU countries was approximately 62%, excluding VAT.

The rates should be the same for all cigarettes.

Cigarettes – structure

The EU rules require that cigarettes are taxed according to a ‘mixed structure’ which

includes the following:

a. A specific component of between 7.5% and 76.5% of the total tax burden (TTB)

- expressed as a fixed amount per 1000 cigarettes;

b. An ad valorem component - expressed as a percentage of the maximum retail

selling price.

Impact on countriesDuring the last decade, the following trends were visible in the EU-28 region18:

ũ Decline of consumption of cigarettes;

ũ Increase or stable excise duty rates;

ũ Increase or stable revenue from excise duties; and

ũ Increase of average excise duty collected per 1000 cigarettes.

Lessons LearnedGetting unanimous agreement from 28 Member States on the revision of legislation is

a challenge. Revising the minimum excise duty rates applied to manufactured tobacco

requires the consent of all Member States. The European Union found that a successful

approach was to set minimum rates at a relatively high level and to give countries that are

well below those rates a transitional period. The countries with a transitional period were

obliged to gradually increase their rates to reach the minimum between 2011 and 2017.

Way forwardRecently, in the context of an evaluation process, the European Commission announced

that the minimum rates and structures applicable under the Directive will be reviewed.

According to Article 19, paragraph 1, of the Directive, the Commission is required to submit

a report on the rates and structures of excise duty every four years. By 2019, when the next

report and possible revision are due, it will have been almost 10 years since the current

minimum rates were adopted and no correction for inflation has been applied. Bearing in

mind the serious harm to health from tobacco products, it should be considered that the

18 Source: European Union - European Commission, DG Taxation and Customs Union, Unit C2 Indirect Taxation.


32

Treaty on the functioning of the European Union requires a high level of protection for

public health and that the EU is a Party to the Framework Convention on Tobacco Control

(WHO FCTC). For these reasons, the Commission believes that it is time to examine the

need to increase the minimum rates. The evaluation of the minimum rates and structures

applied to manufactured tobacco started in 2018.

5.4.2. THE ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS)

Box 5.2 provides a snapshot of the harmonization of tobacco taxes in Economic

Community of West African States (ECOWAS).

BOX 5.2: ECOWAS TOBACCO EXCISE TAX STRUCTURETo harmonize tobacco taxation policy in the framework of the community provisions regulating

tobacco taxation in the Economic Community of West African States (ECOWAS), the ECOWAS

member countries have agreed to a new draft directive. This directive provides for the adoption

of a minimum ad valorem tax of 50%, the elimination of all tax exemptions on tobacco products

(Article 6),1 and the obligatory application of a combination of ad valorem and specific taxes.

Article 7 states that: The taxable amount for the ad valorem duty on the value is calculated:

a. For import products, by the customs value plus duties and taxes levied on entry, except

for VAT and excise duty;

b. For locally-manufactured products, by the ex-factory selling price or output price,

excluding VAT and excise duty.

1Article 6 requires member states, to “make tobacco products subject to an excise duty, which must include an ad valorem duty and a specific duty.”

19 Tobacco tax harmonization in the Southern African Customs Union: Possible Lessons for the Organisation of East Caribbean States (OECS), Corne van Walbeek, Professor of Economics, School of Economics and Principal Investigator, Economics of Tobacco Control Project, Southern Africa Labour and Development Research Unit, University of Cape Town, South Africa, May 2018..

5.4.3. SOUTHERN AFRICAN CUSTOMS UNION (SACU)19

SACU provides another example of how harmonization of the tobacco taxation can be

undertaken with success. In this case, all member states levy the same excise tax on

excisable products (primarily tobacco and alcohol). Box 5.3 provides further details.



20 South Africa has comprehensive statistics about trends in smoking prevalence, but this is not the case for the neighbouring coun-tries. It seems likely that the other SACU countries have experienced similar changes in smoking prevalence over this period, given that they were subject to similar economic forces. Botswana is likely to be an exception, since it implemented an additional levy in 2014 which substantially increased the price of cigarettes.

BOX 5.3: TAX HARMONIZATION IN SACU REGION20

The Southern African Customs Union (SACU) was founded in 1910, and consisted, at the time,

of the Union of South Africa and three surrounding British protectorates, namely Swaziland,

Bechuanaland (now called Botswana), and Basutoland (now called Lesotho) (Gibb, 2006). In 1990

Namibia became SACU’s fifth member after it gained its independence from South Africa. SACU is

the world’s oldest customs union. The four smaller countries in SACU are often referred to as the

BLNS (Botswana, Lesotho, Namibia and Swaziland) countries.

As a customs union, SACU allows free movement of goods and services between members and

imposes a common tariff on imports from outside the customs union. All customs duty revenues

are deposited in a Common Revenue Pool, which is then subdivided according to an agreed

formula between the five members.

SACU is not a monetary union, because each country has its own currency. However, three of

the countries (Lesotho, Swaziland and Namibia) have currencies that are linked one-to-one to

the South African rand. This simplifies the imposition of customs and other taxes on all member

countries. The Botswana pula is not linked to the rand, but is determined by market forces.

Importantly, SACU differs from most other customs unions, in that it imposes the same excise

tax on excisable products (primarily tobacco and alcohol) in all member states. Under the 1969

SACU agreement, which replaced the original 1910 agreement, South Africa had sole discretion

in setting the excise tax structure and rate for the SACU region. Thus, all SA excise taxes were

applicable in the other member countries. From the 2002 amendment of the agreement, all SACU

member states became responsible for determining excise taxes. However, South Africa remains

the main influencer of excise taxes in the region. Currently the excise tax on cigarettes in SACU is

R15.52 (about 1.25 USD) per pack. Since its inception in 1910, the excise tax on tobacco products

has been implemented as a uniform specific tax. This is generally recognised as the most efficient

excise tax structure, from both a public health and fiscal perspective (WHO, 2011 and FCTC Article

6 Guidelines). Between 1994 and about 2004, South Africa (and thus all SACU member states)

used increases in the excise tax as an effective tobacco control strategy. Aggregate cigarette

consumption dropped by about a third over this period, and per capita consumption decreased by

an even greater proportion (van Walbeek, 2005, National Treasury, multiple years). However, since

2005, the South African government’s enthusiasm for tobacco control has waned. Even though

the excise tax has increased in line with South Africa’s inflation (and sometimes by a bit more),

the aggressive tax increases of the middle- and late-1990s (and other tobacco-related legislative

interventions) are something of the past. Predictably, the rate of decrease in cigarette consumption

and smoking prevalence has slowed down substantially since 2005.

34


The norm for most customs unions is to allow members to determine the structure and level of

excise taxes independently of other members’ excise tax structures and levels. For those countries,

the revenues accrue to the country that levied the excise tax. In SACU, all excise tax revenues (and

customs duty revenues) are deposited in the Common Revenue Fund.

A defining characteristic of SACU is the difference in size and economic influence between South

Africa and the BLNS countries. South Africa accounts for more than 85% of the population and

more than 90% of the total GDP of SACU. While decisions with respect to customs and excise

duties are, in principle, taken by all members, in practice South Africa has a near-monopoly on

decision-making power. To compensate the smaller members for this loss of sovereignty, the SACU

agreement, from its inception, distributed the revenues in the Common Revenue Pool in a way

that substantially advantages the BLNS countries. To illustrate, even though the BLNS countries

comprise less than 10% of the SACU GDP, they receive about 55% of the total customs and excise

revenue that is collected in the Common Revenue Pool (Botswana 22%, Lesotho 7%, Namibia 19%

and Swaziland 7%) (SACU, 2016).

In 2008 Botswana introduced an additional country-specific levy on alcohol, over and above the

SACU-imposed excise tax (Pitso and Obot, 2011). This extra levy was driven by the President of the

country, who was particularly opposed to alcohol use and misuse. The revenue that was collected

through this levy did not go into the Common Revenue Pool but was dedicated to support

alcohol-reduction strategies in Botswana. This additional levy on alcohol was deemed so successful

that the country imposed a similar levy of 30% on the ex-works price for locally produced

cigarettes, or the CIF value for imported cigarettes in 2014.

A survey, conducted by the University of Cape Town, of cigarette retail prices reveals that,

unsurprisingly, cigarette prices are substantially higher (by an average of 62%) in Botswana than

in the other four SACU member countries. In the other four countries cigarette prices are broadly

similar. Despite the tobacco industry’s claims that the Botswana levy would encourage large-scale

cross-border smuggling, there is no evidence of this. In fact, the country with the largest illicit trade

problem seems to be South Africa (Liedeman and Mackay, 2016).



5.5. Summary Cigarette Retail Price and Tax Burden Projections – 2018-2021Policy Option 1. The OECS members’ policy options assessed under Scenario 1 (see Table

5.1) would significantly increase the average tax burden (total tax per 20-cigarette pack as a

percentage of average retail price) mainly for Antigua and Barbuda and St. Kitts and Nevis.

The excise tax burden for these countries would rise from a base as low as zero (Antigua

and Barbuda), or close to zero (0.9% St. Kitts and Nevis), to a high of about 30.3% and

32.7%, respectively, in 2021. St. Vincent and the Grenadines would also require a significant

excise tax increase from its current tax burden of under 4% to a proposed 30.6% by 2021.

For other OECS countries, Grenada (with 22% excise tax burden at the outset) would reach

the target of over 30% as early as 2019, and 40% by 2021. St. Lucia, already above a 33%

excise tax burden, would also reach 40% by 2021. St. Lucia and Grenada, having higher

excise taxes, also have a higher average total tax burden (total tax - import duty, customs

excise, and VAT - as percentage of price). The current average for 2018 is projected to be

close to 52% and 41% respectively for these countries. The proposed Scenario 1 would

increase the total tobacco tax burden to 57% in St. Lucia by 2021 and just under 58% in

Grenada; both will remain below the 75% recommended by WBG (1999) and WHO (2015)

(see Table 5.1). St. Vincent and the Grenadines, Antigua and Barbuda, and St. Kitts and Nevis

have an average total tax burden of close to 20%. These averages are mainly the result of

the common external tariff (CET), customs service charge (CSC) and VAT. The proposed

Scenario 1 increases would bring the total tax burden to between 48% and 50% of the

average retail price per pack for the three countries.

36


OECS MEMBER

CIGARETTES TAX BURDEN - SUMMARIZED OUTPUT

BASELINE PROJECTED OPTION 1 FORECAST (SCENARIO 1)

2017 2018 2019 2020 2021

Grenada

Average cigarette price (EC$)/per pack 7.93 7.98 10.72 13.83 18.86

Average cigarette price (US$ per pack) $2.94 $2.96 $3.97 $5.12 $6.99

Average excise tax burden (excise tax as percentage of price) 21.7 21.5 32.5 35.8 40.0

Average tax burden (total tax - import, customs, excise, and VAT - as price%) 40.9 40.7 50.2 53.6 57.7

Specific excise tax (EC$)/ per pack 0 0 1.75 2.63 3.94

Ad valorem excise tax (%) 105% 105% 105% 105% 105%

St. Lucia





Specific excise tax (EC$)/ per pack 3.52 3.52 4.22 5.28 6.60


St. Vincent and the Grenadines







Antigua and Barbuda



Average excise tax burden (excise tax as percentage of price) 0 0 14.1 21.4 30.3




St. Kitts and Nevis

Average cigarette price (EC$)/per pack 8.84 9 11.56 14.04 18.82



Average tax burden (total tax - import, customs, excise, and VAT – price%) 19.7 19.6 32.0 39.6 49.2



Table 5.1: OECS Excise Tax Harmonization: Summary Cigarette Retail Price and Tax Burden Projections - Simulation Policy Option 1 - Scenario 1 Outputs: 2017 – 2021

Source: WBG Staff projections



Policy Option 2. Given that the current tax structure of the OECS countries is

characterized by more than 5 different tobacco-related taxes, it may be desirable to pursue

a simplification of all these taxes across the sub-region. However, in this Scenario the

short-to-medium-term strategy will be to achieve harmonization of excise taxes across

the region. Harmonization in this sense will mean that all countries must levy a minimum

specific excise tax at the same rate.

Considering the different levels of current excise taxation on tobacco, it is proposed that

the harmonization process take place over a specific period, at different speeds for each

country. Table 5.2 shows the modelling outputs of a harmonized cigarette excise tax

through gradually-phased tax increases reaching levels of at least EC$4.00 (US$1.48) in

2021. The proposed tax increase schedule to reach a harmonized specific excise of EC$7.00

(US$2.59) by 2025 is presented in Table 5.3.

If Policy Option 2 is to be adopted, both St. Kitts and Nevis and Grenada would be

converting their ad valorem excise tax (20% and 105% respectively) to a uniform specific

excise tax per 20 cigarette pack. As in Policy 1 proposal, Antigua and Barbuda and St.

Kitts and Nevis would experience the major impact in their attempt to reach the desired

harmonized uniform excise tax increase of EC$4.00 per 20-cigarette pack by 2021. The

cigarette excise tax burden, measured as a percentage of average retail price, for these

countries would rise from a base as low as zero (Antigua and Barbuda) or close to zero

(0.9% St. Kitts and Nevis), to a high of about 25%, in 2021. St. Vincent and the Grenadines’

excise tax burden would increase from a low of under 4% to a high of close to 28% by

2021. Grenada and St. Lucia would experience less impact than other countries, with

Grenada moving from under 22% to close to 32%, and St. Lucia remaining within a range

of 34% to 36%.

The average tobacco tax burden 21 would change from as low as 19.7% in St. Kitts and

Nevis in 2017, to a high of 42% to 52% across the selected OECS countries by 2021, as

shown in Table 5.2.

As expected, the introduction of a harmonized uniform specific excise tax to the OECS

countries, while reducing the price gaps within different price categories in-country,

would bring the average retail prices from under EC$8.00 in 2017 (Antigua and Barbuda

and St. Vincent and the Grenadines) to a common higher price platform, ranging

between EC$12.00 and EC$16.00. The higher price of around EC$16.00 per 20-cigarette

pack (US$6.00) applies to St. Kitts and Nevis and Antigua and Barbuda (both high income

countries (HIC) according to the WBG classification), while the lowest price of EC$11.70

(US$4.30) is applicable to St. Lucia.

21 Measured as a total tobacco tax including ID/CET, CSC, excise, and VAT – as % of price.

38


OECS MEMBER

CIGARETTES TAX BURDEN - SUMMARIZED OUTPUT

BASELINE PROJECTED OPTION 2 FORECAST (SCENARIO 2)

2017 2018 2019 2020 2021

Grenada


Average cigarette price (US$ per pack) $2.94 $2.96 $ 3.53 $ 4.17 $4.67


Average tobacco tax burden (total tax - ID/CET, CSC, excise, and VAT - as% of price) 40.9 40.7 46.6 49.3 50.3

Specific excise tax (EC$)/ per pack 2.70 3.50 4.00


St. Lucia


Average cigarette price (US$ per pack) $3.72 $3.85 $3.92 $4.09 $ 4.34







Average cigarette price (US$ per pack) $2.93 $2.95 $ 3.21 $ 3.92 $ 5.34





Antigua and Barbuda


Average cigarette price (US$ per pack) $2.81 $2.96 $ 3.55 $4.40 $5.93

Average excise tax burden (excise tax as percentage of price) - - 9.8 17.3 25.0


Specific excise tax (EC$)/ per pack - 0.80 1.90 4.00


St. Kitts and Nevis





Specific excise tax (EC$)/ per pack 1.00 2.00 4.00


Table 5.2: OECS Excise Tax Harmonization: Summary Cigarette Retail Price and Tax Burden Projections – Simulation Policy Option 2 - Scenario 2 Outputs: 2017 – 2021

Source: WBG Staff projections



COUNTRY 2018 BASELINE EXCISE TAX PER PACK OF 20s (EC$)

2019 2020 2021 2022 2023 2024 2025

Antigua and Barbuda 0

New Excise Tax Rate (EC$ per pack of 20) 0.80 1.90 4.00 4.75 5.50 6.25 7.00

Increase per year (EC$ per Pack of 20) 0.80 1.10 2.10 0.75 0.75 0.75 0.75

% Increase per year - 138% 111% 19% 16% 14% 12%

Grenada 2.24



% Increase per year 21% 30% 14% 19% 16% 14% 12%

St. Kitts and Nevis 0.55

New Excise Tax Rate (EC$ per pack) 1.00 2.00 4.00 4.75 5.50 6.25 7.00



St. Lucia 3.52





0.31

New Excise Tax Rate (per pack of 20) 0.75 1.85 4.00 4.75 5.50 6.25 7.00



Table 5.3: Proposed OECS Tobacco Excise Tax Harmonization Schedule 2019-2025

Source: HEU, Centre for Health Economics, The University of West Indies, May 2018.

5.6. Impact Assessment of Tobacco Tax Increases in the Selected OECS Member CountriesTo assess the fiscal revenue, price, and consumption impact of proposed tobacco tax

increases in the OECS members, simulations cover 2017 baseline data (based on available

40


22 St. Lucia Customs Agency; Grenada Customs and Excise Division, Ministry of Finance (MoF); St. Vincent and the Grenadines Customs Agency; Antigua and Barbuda Customs and Excise Division; St. Kitts and Nevis Customs Department. 23 Source: World Bank list of economies (June 2017). 24 Considering that Jamaica is classified by the WBG as upper-middle income country (UMIC), the WBG team selected these elasticity ranges as appropriate for the OECS UMIC countries. 25 Economics of tobacco control in Jamaica: Will the pursuit of public health place a fiscal burden on the government? Article; January 2004; Corne van Walbeek, University of Cape Town. 26 Source: World Bank list of economies (June 2017).

BOX 5 4: TOBACCO PRICE AND INCOME ELASTICITY RANGES SELECTED FOR HIC AND UMIC

Scenario Impact Assessments1

1 Meta-analyses of the relationship between tobacco prices and use suggest that the overall elasticity of demand for adults lies between -0.3 and -0.7 (CBO 2012, IARC 2011, Gallet and List 2003, Chaloupka and Warner 2000).

CIGARETTES TYPES HIGH INCOME COUNTRIES (HIC)

UPPER MIDDLE-INCOME COUNTRIES (UMIC)

Price elasticity for economy cigarettes Value (must be negative) -0.5 -0.6

Price elasticity for medium cigarettes Value (must be negative) -0.4 -0.5

Price elasticity for premium cigarettes Value (must be negative) -0.3 -0.4

Income elasticity for economy cigarettes Value (typically positive) 0.8 0.9

Income elasticity for medium cigarettes Value (typically positive) 0.6 0.7

Income elasticity for premium cigarettes Value (typically positive) 0.4 0.5

datasets provided by government agencies,22 and two scenarios for the period from

2018 to 2020/2021. The parameters and assumptions of the simulation model that was

constructed are provided in detail in the tables included in Annexes I, II and III.

To determine the values of price and income elasticity and their impact on tobacco

consumption, retail price, and tax revenue, the scenarios assume that the range of the

price elasticity of demand in two sub-groups of countries is as follows:

ũ For the OECS members classified as Upper Middle-Income countries (UMIC) by

the WBG (Grenada, St. Lucia, and St. Vincent and the Grenadines),23 the ranges

adopted are found in a study carried out on price and income elasticities of

demand in Jamaica (UMIC)24 in 2004 (Corne van Walbeek)25 (see Annex II Table 1).

ũ It is assumed that Antigua and Barbuda, and St. Kitts and Nevis would respond

to ranges observed in high-income countries (HIC) (see Annex II Table 2). This

assumption is supported by the fact that both countries are recognized as high-

income economies by the World Bank Group.26



Box 5.4 shows the elasticities adopted for HIC that are used in the Antigua and Barbuda

and St. Kitts and Nevis simulations, and the UMIC ones used for the Grenada, St. Lucia, and

St. Vincent and the Grenadines projected scenarios (see detailed assumptions in Annex II):

5.6.1. GRENADA EXCISE TAX-GDP IMPACT ASSESSMENT - 2018 FORECAST, AND PROPOSED SCENARIOS

Tables 5.4 and 5.5 present the revenue outputs generated by the two scenarios (see

proposed changes to the current tax structure (in effect since 2014) in Annex III – Table 1)

in Grenada, and the impact that such excise taxes and total tobacco government revenue

contribute to the country GDP, compared to the 2017 baseline and projections for 2018.

ũ Policy Option 1: Maintain the 105% ad valorem excise tax on CIF, the Import

and Customs duty per 20-cigarette pack, and adopt a specific excise tax

of EC$1.75 per pack for 2019. The proposed 2019 specific excise tax rate is

increased by 50% in 2020 to EC$2.63 per 20 cigarettes, and by 50% in 2021

(EC$3.94 per pack). The resultant tax structure, maintaining the 105% ad

valorem tax in the next three years and adding the specific excise tax, would

provide a mixed excise system. A mixed system has both a uniform specific

excise rate and an ad valorem rate applied to tobacco product(s). It is the official

excise system in the EU, is increasingly used in many countries, and is being

adopted in the ECOWAS member countries as previously shown in Box 5.2.

ũ Policy Option 2: Adopt a harmonized uniform specific excise tax (EC$4.00

by 2021). The current ad valorem excise tax would be replaced by a uniform

specific excise tax rate to EC$2.70 per pack in 2019. The specific excise tax rate

in 2019 is increased by 30% in 2020 to EC$3.50 per pack, and by 14% in 2021

to EC$4.00 per pack. Most high-income countries rely heavily on the specific

excise component of the tax. The uniform specific taxes are adjusted regularly

to account for increases in the price level and in average incomes (e.g. SACU see

Box 5.3).

In Scenario 1 (Table 5.4), the tobacco excise tax revenue projected for 2019, maintaining

the 105% ad valorem and adopting a uniform excise tax of EC$1.75 per 20 cigarette pack,

is US$3.5 million. The total tobacco tax revenue collected (import duty, common external

tariffs (ID/CET), customs service charge (CSC), excise taxes, and VAT) would increase from

the US$3.4 million projected for 2018 (0.29% of GDP) to US$5.1 million in 2019 (0.42% of

GDP – WBG projections), representing an additional tax revenue collection of US$1.7

million, while the expected reduction in total cigarettes taxed (as a proxy for consumption)

is estimated to be 13%.

42


For 2020, the tobacco excise tax revenue projected, with current ad valorem tax and

an additional tax of EC$2.63 per 20-cigarette pack, would be about US$4.5 million. The

total tobacco tax revenue for 2020 is estimated at US$6.3 million (0.49% of GDP) and

consumption would be reduced by about 10%.

For 2021, the tobacco excise tax revenue projected, with the increase of the specific excise

to EC$3.94 per 20-cigarette pack, would be about US$5.9 million. The total tobacco tax

revenue for 2021 is projected to be equivalent to US$8.0 million (0.60% of GDP), and the

estimated retail price increase of a 20-cigarette pack would contribute to decrease in the

number of cigarettes taxed (as a proxy for consumption) of 14% in 2021.

With Policy Option 2 (Scenario 2) (Table 5.5), which uses a harmonized uniform specific

excise tax (EC$4.00 by 2021), changing the current ad valorem excise tax by a uniform

specific excise tax rate of EC$2.70 per pack in 2019, the projected tobacco excise tax

revenue will be close to US$2.9 million; US$3.5 million in 2020 (with EC$3.50/per pack);

and US$3.8 million in 2021 (with EC$4.00/per pack). This would increase total tobacco tax

revenue collected (ID/CET, CSC, excise taxes, and VAT) from US$3.4 million (0.29% of GDP),

projected in 2018, to US$4.8 million in 2019 (0.39% of GDP), an additional tax revenue

collection of US$1.4 million, while the total of cigarettes taxed (as a proxy for consumption)

is projected to fall by 8.4%.

For 2020, total tobacco tax revenue is projected to reach US$5.13 million (0.40% of GDP)

and consumption to fall by 6.6%. Total tobacco tax revenue for 2021 is projected to reach

US$5.6 million (0.42% of GDP). The estimated retail price increase for a 20-cigarette pack is

expected to decrease the number of cigarettes taxed in 2021 by a further 4.6% over 2020

projections in this scenario.

Source: HEU, Centre for Health Economics, The University of West Indies, May 2018.



GOVERNMENT REVENUE TYPE

BASELINE (2017): 105% AD VALOREM EXCISE OF CIF/CUSTOMS DUTY PER 20 CIGARETTES PACK

EXPECTED CONTRIBUTION TO GDP

FORECAST (2018): MAINTAIN 105% AD VALOREM EXCISE OF CIF/CUSTOMS DUTY PER 20 CIGARETTES PACK


MAINTAIN THE 105% AD VALOREM EXCISE CIF/CUSTOMS DUTY PER 20 CIGARETTES PACK, AND ADOPT EC$1.75 SPECIFIC EXCISE TAX PER 20 C/PACK -2019


MAINTAIN THE 105% AD VALOREM EXCISE CIF/CUSTOMS DUTY PER 20 CIGARETTES PACK, AND INCREASE THE SPECIFIC EXCISE TAX TO EC$2.63 PER 20 C/PACK -2020


MAINTAIN THE 105% AD VALOREM EXCISE CIF/CUSTOMS DUTY PER 20 CIGARETTES PACK, AND INCREASE THE SPECIFIC EXCISE TAX TO EC$3.94 PER 20 C/PACK -2021


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es)

0.06

20.

063

0.05

50.

049

0.04

2

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

7.93

7.98

10.7

13.8

18.9

Aver

age e

xcise

tax b

urde

n (e

xcise

tax

as p

erce

ntag

e of p

rice)

21.7

21.5

32.5

35.8

40.0

Aver

age t

ax b

urde

n (to

tal t

ax -

impo

rt,

excis

e, an

d VA

T - a

s per

cent

age o

f pr

ice)

40.9

40.7

50.2

53.6

57.7

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$2.9

4$2

.96

$3.9

7$

5

.12$6

.99

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

85.9

85.9

174.

124

7.237

7.4

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

[1]

0.00

530.

0054

0.00

950.

0121

0.01

60

Tota

l exc

ise ta

x rev

enue

(US$

mill

ion)

$1.9

60.

18%

$2.0

10.

17%

$3.5

30.

29%

$4.4

80.

35%

$5.9

20.

44%

Tota

l tob

acco

gove

rnm

ent r

even

ue

(impo

rt du

ty, e

xcise

, and

VAT

, bill

ion

EC$)

20.

009

0.00

90.

014

0.01

70.

022

Tota

l tob

acco

gove

rnm

ent r

even

ue

(impo

rt du

ty, e

xcise

, and

VAT

, US$

m

illio

n) *

$3.3

00.

30%

$3.3

90.

29%

$5.0

90.

42%

$6.2

80.

49%

$8.0

40.

60%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sa

les ta

xed

(%)

-7.9

2.2

-13.

2-1

0.6

-13.

5

Table 5.4: Grenada Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021

Source: WBG Staff estimates. 1Note: The simulation model result of EC$5.58 million for 2016 provided the metrics to calibrate the model comparing this figure with actual revenue reported by the Grenada Customs and Excise Division, Ministry of Finance (GCED/MOF) with a small difference of less than 0.33% which falls within a statistically acceptable range. 2The total tobacco government revenue for cigarette taxes, including import duty, excise, and VAT, generated by the simulation model assumes that the VAT is applied along the cigarette distribution chain from customs/ex-factory to wholesale and retail points of sale.

44



BASELINE (2017): 105% AD VALOREM EXCISE OF CIF/CUSTOMS DUTY PER 20 CIGARETTES PACK


FORECAST (2018): MAINTAIN 105% AD VALOREM EXCISE OF CIF/CUSTOMS DUTY PER 20 CIGARETTES PACK


REPLACE THE AD VALOREM EXCISE TAX TO SPECIFIC EXCISE TAX RATE TO EC$2.70 PER PACK 2019 (SCENARIO 2)


INCREASE THE 2019 SPECIFIC EXCISE TAX RATE 30% TO EC$3.50 PER PACK 2020 (SCENARIO 2)


INCREASE THE 2020 SPECIFIC EXCISE TAX RATE BY 14% TO EC$4.00 PER PACK 2021 (SCENARIO 2)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es)

0.06

20.

063

0.05

80.

054

0.05

1

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

7.93

7.98

9.54

11.26

12.6

0

Aver

age e

xcise

tax b

urde

n (e

xcise

tax

as p

erce

ntag

e of p

rice)

21.7

21.5

29.3

32.1

31.7

Aver

age t

obac

co ta

x bur

den

(tota

l tax

- I

D/C

ET, C

SC, e

xcise

, and

VAT

- as

%

of p

rice)

40.9

40.7

46.6

49.3

50.3

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$ 2

.94

$2.9

6$3

.53

$ 4.

17$

4.67

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

85.9

85.9

135.

017

5.0

200.

0

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

0.

0053

0.00

540.

0078

0.00

90.

010

Tota

l tob

acco

excis

e tax

reve

nue (

US$

m

illio

n)$

1.9

60.

18%

$2.0

10.

17%

$ 2.

890.

24%

$3.5

00.

28%

$3.8

10.

29%

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

CSC,

excis

e, an

d VA

T, b

illio

n EC

$)

0.00

90.

009

0.01

30.

014

0.01

5

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

CSC,

excis

e, an

d VA

T, U

S$ m

illio

n)

$

3.

300.

29%

$ 3.

390.

29%

$4.75

0.39

%$5

.130.

40%

$5.5

70.

42%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sa

les ta

xed

(%)

-7.9

2.2

-8.4

-6.6

-4.6

Table 5.5: Grenada Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option 2 (Scenario 2) Outputs 2019-2021

Source: WBG Staff estimates.



27 A uniform specific excise system maximizes the impact of retail prices overall, reducing the gap between price tiers (as well as between brands) and thereby generating higher revenues for government, at least over the short and medium terms.

5.6.2. ST. LUCIA EXCISE TAX-GDP IMPACT ASSESSMENT - 2018 FORECAST, AND PROPOSED SCENARIOS

Table 5.6 presents the revenue outputs generated by the two proposed scenarios (see

proposed changes to the tax structure in effect since 2013 in Annex III – Table 2) for St.

Lucia and the impact that excise tax and total tobacco government revenue have on the

country’s GDP, compared to a 2017 baseline and projected figures for 2018.

ũ Policy Option 1: Under this scenario, St. Lucia would reach a 40% tobacco

excise tax burden by 2021, like Scenario 1 for Grenada. To achieve this, the 2017-

2018 uniform specific excise tax rate27 (EC$3.52/pack) is increased by 20% (to

EC$4.22/pack), by 25% (to EC$5.28/pack), and again by 25% (to EC$6.60/pack) in

2019, 2020 and 2021, respectively (see Table 5.6). For 2021, both expected GDP

per capita growth and projected inflation would call for an annual increase of

the uniform specific excise tax, at a minimum, of over 5%. The proposed 25% for

2021 would exceed this amount, helping to reduce the expected consumption

in that year by about 8%.

ũ Policy Option 2: Adopting a harmonized uniform specific excise tax (EC$4.00

by 2021), the current uniform specific excise tax rate in scenario 2 is increased

by 4% to EC$3.65 per pack in 2019. The specific excise tax rate of EC$3.65 in

2019 is increased by 4% in 2020 to EC$3.80 per pack, which is increased by 5%

to EC$4.00 in 2021. As previously stated, it is recommended that member states

regularly adjust the specific excise tax rate to account for increases in both the

price level and in average incomes.

Under Scenario 1 (Table 5.6), the tobacco excise tax revenue projected for 2019, with the

increased uniform excise tax of EC$4.22 per 20-cigarette pack, is US$4.5 million (0.25% of

GDP) representing an increase of close to US$0.5 million over a projected 2018 tobacco

excise tax revenue of US$4.0 million (0.22% of GDP). The total tobacco tax revenue in St.

Lucia would increase from the US$5.6 million projected for 2018 (0.31% of GDP) to US$6.2

million in 2019 (0.34% of GDP – WBG projections), representing an additional tax revenue

collected of US$0.6 million, while the expected number of taxed cigarettes is estimated

to fall by 5.2%. For 2020, the tobacco excise tax revenue projected with the increase to

EC$5.28 per 20 cigarette pack tax would be about US$5.24 million. The total tobacco

tax revenue for 2020 is estimated at US$7.1 million (0.37% of GDP) and consumption

would be reduced by about 7.1%. For 2021, the tobacco excise tax revenue estimated

with the increase to EC$6.60 per pack would be close to US$6.0 million (0.31% of GDP).

46


The total tobacco tax revenue for 2021 is estimated at US$8.0 million (0.41% of GDP) and

consumption would be reduced by about 8.1%

Under Policy Option 2 (Scenario 2) in Table 5.7, with the adoption of the harmonized

uniform specific excise tax approach (EC$4.00 by 2021), at a lower rate than that proposed

in Scenario 1, the current uniform specific excise tax rate in Scenario 2 is increased to

EC$3.65 per pack in 2019. For that excise tax increase, the projected tobacco excise tax

revenue would be close to US$4.1 million and, with EC$3.80/per pack, US$4.3 million in

2020, and US$4.4 million with the harmonized excise tax of EC$4.00 per pack in 2021.

This would increase the total tobacco tax revenue collected from the US$5.6 (0.31% of

GDP) projected in 2018 to US$5.8 million in 2019 (0.31% of GDP), an additional tax revenue

collection of US$0.2 million, while the total cigarettes taxed is estimated to remain equal.

Total tobacco tax revenue for 2020 is projected to reach US$6.0 million (0.31% of GDP) and

expected consumption to fall by 0.6%. Total tobacco tax revenue for 2021 is projected to

increase to US$6.2 million (0.31% of GDP), and the projected number of total cigarettes

taxed to fall by 2%.




BASELINE 2017 (PROJECTED): SIMPLE SPECIFIC EC$ 3.52 PER 20 CIGARETTES PACK


SPECIFIC EXCISE TAX RATE 2018 MAINTAINED AT EC$3.52 PER PACK (FORECAST)


SPECIFIC EXCISE TAX RATE 2018 INCREASED BY 20% IN 2019 TO EC$4.22 PER PACK (SCENARIO 1)






Tota

l cig

aret

tes t

axed

(bill

ion

piec

es) *

0.06

10.

061

0.05

80.

054

0.04

9

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

10.0

410

.41

11.76

13.77

16.5

2

Aver

age e

xcise

tax b

urde

n (e

xcise

tax a

s pe

rcen

tage

of p

rice)

35.1

33.8

35.9

38.3

40.0

Aver

age t

obac

co ta

x bur

den

(tota

l tax

- ID

/EC

T, C

SC, e

xcise

, and

VAT

- as

% of

pric

e)52

.951

.853

.355

.256

.7

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$ 3.

72$

3.85

$4.3

5$5

.10$6

.12

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

176.

017

6.0

211.2

264.

033

0.0

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

0.01

070.

0107

0.01

220.

0141

0.01

62

Tota

l tob

acco

excis

e tax

reve

nue (

US$

m

illio

n)$3

.97

0.23

%$3

.96

0.22

%$4

.51

0.25

%$5

.24

0.28

%$6

.02

0.31

%

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D/

ECT,

CSC

, exc

ise, a

nd V

AT, b

illio

n EC

$) 2

0.01

50.

015

0.01

70.

019

0.02

2

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D/

ECT,

CSC

, exc

ise, a

nd V

AT, U

S$ m

illio

n)$5

.52

0.32

%$

5.58

0.31

%$6

.21

0.34

%$

7.06

0.37

%$

8.01

0.41

%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sales

ta

xed

(%)

4.7

-0.1

-5.2

-7.1

-8.1

Table 5.6: St. Lucia Summary Cigarette Excise Tax GDP Impact 2017, 2018 Forecast, and Proposed, Scenario 1 Outputs 2019-2021

Source: WBG Staff estimates. * Source: Revenues Estimates St. Lucia Customs Agency: Tobacco Excise Revenue (2016= 10.24 EC$ million; 2017 = 10.72 EC$ million) 1 1 Note: A simulation model result of EC$10.2 million for 2016 and EC$10.7 million for 2017 provided the metrics to calibrate the model comparing the figures with actual revenue reported by the St. Lucia Customs Agency (SCA) (*) with a small difference of less than 0.05%, which falls in a statistically acceptable range. 2 The total government revenue for cigarette taxes, including ID/CET, CSC, excise, and VAT, generated by the simulation model, assumes that the VAT is applied along the cigarette distribution chain from customs/ex-factory, to wholesale and retail points of sale.

48



BASELINE 2017 (PROJECTED): SIMPLE SPECIFIC EC$ 3.52 PER 20 CIGARETTES PACK


SPECIFIC EXCISE TAX RATE 2018 MAINTAINED AT EC$3.52 PER PACK (FORECAST)




SPECIFIC EXCISE TAX RATE 2019 INCREASED BY 4% IN 2020 TO EC$3.80 PER PACK, (OPTION 2)


SPECIFIC EXCISE TAX RATE 2020 INCREASED BY 5% IN 2021 TO EC$4.00 PER PACK, (SCENARIO 2)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es) *

0.06

10.

061

0.06

10.

061

0.05

9

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

10.0

410

.410

.611.

111.

7

Aver

age e

xcise

tax b

urde

n (e

xcise

tax

as p

erce

ntag

e of p

rice)

35.1

33.8

34.4

35.5

34.1

Aver

age t

obac

co ta

x bur

den

(tota

l tax

- I

D/E

CT, C

SC, e

xcise

, and

VAT

- as

%

of p

rice)

52.9

51.8

34.4

35.5

34.1

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$3.72

$3.8

5$3

.92

$4.0

9$4

.34

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

176.

017

6.0

182.

519

0.0

200.

0

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

0.01

070.

0107

0.01

110.

012

0.01

2

Tota

l exc

ise ta

x rev

enue

(US$

mill

ion)

$3.9

70.

23%

$3.9

60.

22%

$4.12

0.22

%$4

.26

0.22

%$4

.40

0.22

%

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D/

ECT,

CSC

, exc

ise, a

nd V

AT, b

illio

n EC

$) [2

]0.

015

0.01

50.

016

0.01

60.

017

Tota

l tob

acco

gove

rnm

ent r

even

ue

(ID/E

CT, C

SC, e

xcise

, and

VAT

, US$

m

illio

n)$5

.52

0.32

%$5

.58

0.31

%$5

.760.

31%

$5.9

60.

31%

$6.15

0.31

%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sa

les ta

xed

(%)

4.7

-0.1

0.1

-0.6

-2.0

Table 5.7: St. Lucia Summary Cigarette Excise Tax GDP Impact 2017, 2018 Forecast, and Proposed, Policy Option 2 (Scenario 2) Outputs 2019-2021




5.6.3. ST. VINCENT AND THE GRENADINES EXCISE TAX-GDP IMPACT ASSESSMENT - 2018 FORECAST, AND PROPOSED SCENARIOS


proposed changes to the tax structure in effect since 2012 in Annex III – Table 3) for St.

Vincent and the Grenadines, and the impact of excise tax and total tobacco government

revenue on the country’s GDP, compared to the 2017 baseline and projected 2018 figures.

ũ Policy Option 1: The current uniform specific excise tax rate28 of EC$1.55 per

100 cigarettes (equivalent to EC$0.31/pack) has been in effect in St. Vincent and

the Grenadines since 2012. Currently, the excise tax burden is under 4% of the

average retail price. In a concerted OECS harmonization effort, and to reach

a suggested 30% minimum excise tax burden gradually by 2021, the strategy

proposed in Scenario 1 is to bring the current 2018 specific excise tax rate to

EC$0.78 per 20-cigarette pack in 2019 (a 150% increase). The proposed excise

tax from 2019 is then increased by 150% to EC$1.94 per 20-cigarette pack in

2020. The specific excise tax rate reached in 2020 would be increased again

by 150%, to EC$4.84 per 20-cigarette pack, in 2021, reaching a 30.6% tobacco

excise tax burden (see Scenario 1 outputs in Table 5.8).


by 2021), the current uniform specific excise tax rate (EC$0.31/pack) is increased

by 142% in Scenario 2 to EC$0.75 per pack in 2019. The 2019 specific excise tax

of EC$0.75 per pack is then increased 147% to EC$1.85 per pack in 2020. This is

further increased by 116% to the harmonized specific excise tax of EC$4.00 per

pack in 2021, bringing the average excise tax burden to 28%, as shown in Table

5.9 Scenario 2. As previously stated, it is recommended that the specific excise

tax rate is regularly adjusted to account for increases in the price level and in

average incomes.

In Scenario 1 (Table 5.8), the tobacco excise tax revenue projected for 2019, with an

increased uniform excise tax of EC$0.78 per 20-cigarette pack, is US$0.6 million (0.07% of

GDP). The total tobacco tax revenue collected in St. Vincent and the Grenadines would

increase from the US$1.25 million (0.15% of GDP) projected in 2018 to US$1.6 million in

2019 (0.19% of GDP), an additional tax revenue collection of US$0.4 million, while the total

cigarettes taxed (as a proxy for consumption) is estimated to fall by 3.1%. For 2020, the

tobacco excise tax revenue projected with the tax increase to EC$1.94 per 20-cigarette

pack would be about US$1.4 million. The total tobacco tax revenue for 2020 is estimated

28 A uniform specific excise system maximizes the impact of retail prices overall, reducing the gap between price tiers (as well as between brands) and thereby generating higher revenues for government, at least over the short and medium terms.

50


at US$2.5 million (0.23% of GDP) and consumption would be reduced by close to 9%. For

2021, the tobacco excise tax revenue projected, with the increased tax to EC$4.84 per

20-cigarette pack, would be about US$2.8 million. The total tobacco tax revenue for 2021

is estimated at US$4.3 million (0.37% of GDP) and consumption would be reduced by close

to 17%.

Under Policy Option 2 (Scenario 2), Table 5.9, with the adoption of the harmonized uniform

specific excise tax (EC$4.00 by 2021), current excise tax increases from EC$0.31, effective

since 2012, to EC$0.75 per pack. The estimated tobacco excise tax revenue will be close

to US$0.6 million (0.07% of GDP); with EC$1.85/per pack, it would be US$1.3 million in

2020 (0.12% of GDP), and with EC$4.00 per pack, US$2.4 million (0.21% of GDP) in 2021.

This would increase total tobacco tax revenue collected from US$1.25 (0.15% of GDP),

projected in 2018, to US$1.6 million in 2019 (0.19% of GDP), an additional tax revenue of

US$0.4 million, while the total of cigarettes taxed is estimated to fall by 2.9%. Total tobacco

tax revenue for 2020 is projected to reach US$2.5 million (0.23% of GDP) and expected

consumption would fall by 8%. For 2021, total tobacco tax revenue is projected to reach

US$3.9 million (0.33% of GDP) with expected consumption falling by 13.5%.




BASELINE (2017): SPECIFIC EXCISE EC$1.55 PER 100 CIGARETTES


2018 FORECAST: SIMPLE SPECIFIC EC$ 1.55 PER 100 CIGARETTES (EC$0.31/20 CIGARETTES PACK)


SPECIFIC EXCISE TAX RATE 2018 INCREMENTED 150% TO EC$0.78 PER 20 CIGARETTES PACK IN 2019 (SCENARIO 1)


SPECIFIC EXCISE TAX RATE 2019 INCREASED BY 150% TO EC$1.94 PER 20 CIGARETTES PACK IN 2020 (SCENARIO 1)


SPECIFIC EXCISE TAX RATE 2020 INCREASED BY 150% TO EC$4.84 PER 20 CIGARETTES PACK IN 2021 (SCENARIO 1)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es) *

0.04

20.

043

0.04

10.

038

0.03

1

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

7.92

7.96

8.7

10.8

15.8

Aver

age e

xcise

tax b

urde

n (e

xcise

tax a

s pe

rcen

tage

of p

rice)

3.9

3.9

8.9

17.9

30.6

Aver

age t

ax b

urde

n (to

tal t

ax -

impo

rt,

excis

e, an

d VA

T - a

s per

cent

age o

f pric

e)19

.919

.925

.034

.347

.3

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$2.9

3$2

.95

$3.2

2$4

.00

$5.8

6

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

15.5

15.5

38.8

96.9

242.

2

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

10.

0006

0.00

070.

0016

0.00

370.

0076

Tota

l exc

ise ta

x rev

enue

(US$

mill

ion)

$0.2

30.

03%

$0.2

50.

03%

$0.5

90.

07%

$1.3

50.

12%

$2.8

20.

24%

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D/

CET,

CSC

, exc

ise, a

nd V

AT, b

illio

n EC

$)2

0.00

30.

003

0.00

40.

007

0.01

2

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D/

CET,

CSC

, exc

ise, a

nd V

AT, U

S$ m

illio

n)

$1.18

0.15

%$1

.25

0.15

%$1

.62

0.19

%$2

.54

0.23

%$4

.30

0.37

%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sales

ta

xed

(%)

3.9

0.8

-3.1

-8.8

-16.

8

Table 5.8: St. Vincent and the Grenadines Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021

Source: WBG Staff estimates. 1Note: The simulation model result of EC$0.63 million for 2016 provided the metrics to calibrate the model comparing this figures with actual revenue reported by the St. Vincent and the Grenadines Customs Agency (*) with a small difference of less than 0.7% which falls within a statistically acceptable range. 2The total tobacco government revenue for cigarette taxes, including import duty, excise, and VAT generated by the simulation model, assumes that the VAT is applied along the cigarette distribution chain from customs/ex-factory to wholesale and retail points of sale.

52



BASELINE (2017): SPECIFIC EXCISE EC$1.55 PER 100 CIGARETTES


2018 FORECAST: SIMPLE SPECIFIC EC$ 1.55 PER 100 CIGARETTES (EC$0.31/20 CIGARETTES PACK)


SPECIFIC EXCISE TAX OF EC$0.31 PER PACK IN 2018 IS INCREASED 142% TO EC$0.75 PER PACK IN 2019 (SCENARIO 2)


SPECIFIC EXCISE TAX OF EC$ 0.75 PER PACK IN 2019 IS INCREASED 147% TO EC$1.85 PER PACK IN 2020 (SCENARIO 2)


SPECIFIC EXCISE TAX OF $1.85 PER PACK IN 2020 IS INCREASED 116% TO EC$4.00 PER PACK IN 2021 (SCENARIO 2)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es) *

0.04

20.

043

0.04

20.

038

0.03

3

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

7.92

7.96

8.7

10.6

14.4

Aver

age e

xcise

tax b

urde

n (e

xcise

tax

as p

erce

ntag

e of p

rice)

3.9

3.9

8.7

19.0

27.7

Aver

age t

ax b

urde

n (to

tal t

ax -

impo

rt,

excis

e, an

d VA

T - a

s per

cent

age o

f pr

ice)

19.9

19.9

8.7

19.0

27.7

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$2.9

3$

2.95

$ 3.

21$

3.92

$ 5.

34

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

15.5

15.5

37.5

92.5

200.

0

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

0.

0006

0.00

070.

0016

0.00

40.

007

Tota

l tob

acco

excis

e tax

reve

nue (

US$

m

illio

n)$

0.23

0.03

%$

0.25

0.03

%$

0.58

0.07

%$

1.31

0.12

%$

2.44

0.21

%

Tota

l gov

ernm

ent r

even

ue in

bill

ion

EC$)

0.00

30.

003

0.00

40.

007

0.01

0

Tota

l tob

acco

gove

rnm

ent r

even

ue U

S$

mill

ion

$ 1.1

80.

15%

$

1.2

50.

15%

$ 1.6

00.

19%

$

2.

480.

23%

$

3.

860.

33%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sa

les ta

xed

(%)

3.9

0.8

-2.9

-8.1

-13.

5

Table 5.9: St. Vincent and the Grenadines Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option (Scenario 2) Outputs 2019-2021




5.6.4. ANTIGUA AND BARBUDA EXCISE TAX-GDP IMPACT ASSESSMENT - 2018 FORECAST, AND PROPOSED SCENARIOS


proposed tax structure in Annex III – Table 4) in Antigua and Barbuda, and what such

excise tax and total tobacco government revenue contribute to the country’s GDP,

compared to a 2017 baseline and projected figures for 2018.

ũ Policy Option 1: Antigua and Barbuda, unlike the other OECS members being

assessed, does not have a uniform specific or ad valorem excise tax rate. In the

ongoing OECS harmonization effort, to reach the suggested 30% minimum

excise tax burden gradually by 2021, Scenario 1 proposes that the country

adopt a uniform specific excise tax rate of EC$1.50 per pack in 2019. A uniform

specific excise system maximizes the impact of retail prices overall, reducing the

gap between price tiers (as well as between brands) and thereby generating

higher revenues for government, at least over the short and medium terms. The

EC$1.50 per 20-cigarette pack proposed in 2019 would be increased by 100% to

EC$3.00 per pack in 2020. The specific excise tax rate reached in 2020 would be

increased again by 100% to EC$6.00 per 20-cigarette pack in 2021, reaching a

30.3% tobacco excise tax burden (see Scenario 1 outputs in Table 5.10).


by 2021), the proposed uniform specific excise tax rate to be adopted in 2019

would be EC$0.80/pack in scenario 2. The specific excise tax of EC$ 0.80 per

pack in 2019 is then increased by 138% to EC$1.90 per pack in 2020, and to

EC$4.00 per pack in 2021, bringing the average excise tax burden close to 25%,

as shown in Table 5.11 for Scenario 2. Once again, it is recommended that the

rate of the specific excise tax be adjusted regularly to keep pace with increases

in the price level and in average incomes.

Under Scenario 1 (Table 5.10), the tobacco excise tax revenue projected for 2019, with the

adoption of a uniform excise tax of EC$1.50 per 20-cigarette pack, is US$1.34 million (0.08%

of GDP). The total tobacco tax revenue collected (revenue recovery charge (RRC), excise

taxes, and VAT) in Antigua and Barbuda would increase from US$1.24 million (0.07% of

GDP), projected in 2018, to US$2.7 million in 2019 (0.15% of GDP), an additional tax revenue

of US$1.5 million, while the total cigarettes taxed is estimated to fall by 10%. For 2020, the

tobacco excise tax revenue projected with the increased EC$3.00 tax per 20-cigarette

pack would be about US$2.4 million. The total tobacco tax revenue for 2020 is estimated

at US$4.1 million (0.23% of GDP) and consumption would be reduced by close to 9%. The

total tobacco tax revenue for 2021 is estimated at US$6.2 million (0.34% of GDP) with an

estimated fall in consumption of close to 12%.

54


Under Scenario 2, Table 5.11, with the adoption of the proposed harmonized uniform

specific excise rate increase to EC$0.80, the estimated tobacco excise tax revenue would

be close to US$0.8 million (0.04% of GDP), US$1.7 million with the tax of EC$1.90/per pack

in 2020 (0.09% of GDP), and US$3.1 million (0.17% of GDP) in 2021 with the harmonized

specific excise tax of EC$4.00 per pack. This would increase total tobacco tax revenue

collected (CET, RRC, excise taxes, and VAT) from the US$1.24 million (0.07% of GDP)

projected in 2018 to US$2.1 million in 2019 (0.12% of GDP), while the total of cigarettes

taxed is estimated to fall by 6.5%. Total tobacco tax revenue for 2020 is projected to reach

US$3.1 million (0.18% of GDP) and expected consumption to fall by 7%. For 2021, total

tobacco tax revenue is projected to reach US$4.9 million (0.27% of GDP) and expected

consumption to fall by 10%.




BASELINE (2017): NO AD VALOREM OR SPECIFIC EXCISE TAX


2018 (PROJECTED): NO AD VALOREM OR SPECIFIC EXCISE TAX


ADOPT SPECIFIC EXCISE TAX RATE AT C$1.50 PER PACK 2019 (SCENARIO 1)


INCREASE THE SPECIFIC EXCISE FROM EC$1.50 IN 2019 TO EC$3.00 IN 2020 (SCENARIO 1)


INCREASE THE SPECIFIC EXCISE FROM EC$3.00 IN 2020 TO EC$6.00 IN 2021 (SCENARIO 1)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es) 1

0.05

40.

054

0.04

80.

044

0.03

9

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

7.60

8.00

10.6

14.0

419

.79

Aver

age e

xcise

tax b

urde

n (e

xcise

tax a

s pe

rcen

tage

of p

rice)

-

-

14.1

21

.430

.3

Aver

age t

ax b

urde

n (to

tal t

ax -

impo

rt,

excis

e, an

d VA

T - a

s per

cent

age o

f pric

e)19

.8

20

.1

32.8

40

.2

48.6

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$2.8

1$2

.96

$3.9

4$

5.20

$7.3

3

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

--

75.0

150.

030

0.0

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

--

0.00

360.

0066

0.01

16

Tota

l exc

ise ta

x rev

enue

(US$

mill

ion)

$-0.

00%

$-0.

00%

$1.3

40.

08%

$2.4

40.

14%

$ 4.

280.

24%

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

RRC,

excis

e, an

d VA

T, b

illio

n EC

$) 3

0.00

30.

003

0.00

70.

011

0.01

7

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

RRC,

excis

e, an

d VA

T, U

S$ m

illio

n)$1

.190.

08%

$1.2

40.

07%

$2.6

90.

15%

$4.0

60.

23%

$ 6.

210.

34%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sales

ta

xed

(%)

5.4

0.6

-10.

6-9

.3-1

2.1

Table 5.10: Antigua and Barbuda Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021

Source: WBG Staff estimates. 1Source: Revenues Estimates, Antigua and Barbuda Customs and Excise Division; Tobacco import duty and Revenue Recovery Charge (RRC) (2016= EC$0.66 million; 2017 = EC$ 1.37 million). 2Note: The simulation model result of EC$0.77 million in Import Duty and RRC close for 2016 and EC$ 1.378 for 2016 provided the metrics to calibrate the model comparing these figures with actual revenue reported by the Antigua and Barbuda Customs and Excise Division with a difference of less than 1.0%, which falls within a statistically acceptable range. 3The total tobacco government revenue for cigarette taxes including import duty, excise, and VAT generated by the simulation model, assumes that the VAT is applied along the cigarette distribution chain from customs + proposed excise, to wholesale and retail points of sale

56



BASELINE (2017): NO AD VALOREM OR SPECIFIC EXCISE TAX


2018 (PROJECTED): NO AD VALOREM OR SPECIFIC EXCISE TAX


ADOPT SPECIFIC EXCISE TAX RATE AT C$0.80 PER PACK 2019 (SCENARIO 2)


INCREASE THE SPECIFIC EXCISE 138% FROM EC$0.80 IN 2019 TO EC$1.90 IN 2020 (SCENARIO 2)


INCREASE THE 2020 SPECIFIC EXCISE FROM EC$1.90 BY 111% TO EC$4.00 BY 2021 (SCENARIO 2)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es)

[1]

0.05

40.

054

0.05

10.

047

0.04

2

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

7.60

8.00

9.58

11.88

16.0

1

Aver

age e

xcise

tax b

urde

n (e

xcise

tax

as p

erce

ntag

e of p

rice)

--

9.8

17.3

25.0

Aver

age t

obac

co ta

x bur

den

(tota

l tax

- im

port,

excis

e, an

d VA

T - a

s % of

pric

e)19

.820

.127

.735

.043

.5

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$2.8

1$2

.96

$3.5

5$4

.40

$5.9

3

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

--

40.0

95.0

200.

0

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

--

0.00

200.

004

0.00

8

Tota

l exc

ise ta

x rev

enue

(US$

mill

ion)

$-0.

00%

$-0.

00%

$0.75

0.04

%$1

.65

0.09

%$3

.130.

17%

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

RRC,

excis

e, an

d VA

T, b

illio

n EC

$)0.

003

0.00

30.

006

0.00

80.

013

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

RRI,

excis

e, an

d VA

T, U

S$ m

illio

n)$1

.190.

08%

$ 1.2

40.

07%

$2.0

80.

12%

$3.14

0.18

%$4

.87

0.27

%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sa

les ta

xed

(%)

5.4

0.6

-6.5

-7.1

-10.

1

Table 5.11: Antigua and Barbuda Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option 2 (Scenario 2) Outputs 2019-2021




5.6.5. ST. KITTS AND NEVIS EXCISE TAX-GDP IMPACT ASSESSMENT - 2018 FORECAST, AND PROPOSED SCENARIOS

Tables 5.12 and 5.13 present the revenue outputs generated by the two scenarios in

Annex III – Table 5) in St. Kitts and Nevis, and the contribution of such excise tax and total

government tobacco revenue to the country’s GDP, compared to a 2017 baseline and

projected figures for 2018.

ũ Policy Option 1: Currently, the average excise tax burden in St. Kitts and Nevis

consists of the 20% ad valorem excise tax, which is applied to the specific

import duty (EC$18 per kilo) and the Customs Service Charge (CSC). This is

a very low base, and represents less than 1% of the average retail price. In a

concerted OECS harmonization effort to reach a suggested 30% minimum

excise tax burden gradually by 2021, Scenario 1 proposes that the 20% ad

valorem excise tax be maintained, and a uniform specific excise tax29 of EC$1.50

per pack be adopted for 2019. The 2020 specific excise tax rate would then be

increased by 100% to EC$3.00 per 20 cigarettes, and again by 100% in 2021 (to

EC$6.00 per pack). The resultant tax structure, maintaining the 20% ad valorem

tax and adding the uniform specific excise tax, would provide a mixed specific

excise system. A mixed specific system is also the official excise system in the EU

and is being adopted in the ECOWAS member countries, as shown in Boxes 5.1

and 5.2.


by 2021), the current ad valorem excise tax would be replaced by a uniform

specific excise tax rate, of EC$1.00 per pack in 2019. The specific excise tax rate

for 2019 would be increased by 100% in 2020 to EC$2.00 per pack, and again by

100% in 2021 reaching the proposed harmonized specific excise tax of EC$4.00

per pack.

Under Scenario 1 (Table 5.12), the tobacco excise tax revenue projected with the mixed

system (20% ad valorem excise tax and EC$1.50/pack) is US$1.3 million. The total tobacco

tax revenue projected would increase from US$0.14 million (0.01% of GDP), projected

for 2018, to US$1.4 million in 2019 (0.13% of GDP – WBG projections), while the expected

reduction in total cigarettes taxed is estimated to be 6%. For 2020, the tobacco excise

tax revenue projected, with current ad valorem tax and EC$3.00/pack, would be about

US$2.33 million. Total tobacco tax revenue for 2020 is estimated at US$2.42 million (0.22%

29 Most high-income countries rely heavily on the specific excise component of the taxes. “A uniform specific excise system maximizes the impact of retail prices overall, reducing the gap between price tiers (as well as brands) and thereby generating higher revenues for government, at least over the short and mid-term” (Economics of Taxation Toolkit, WBG, March 2018).

58


of GDP) and consumption would be reduced by about 5%. For 2021, the tobacco excise

tax revenue projected with the specific excise of EC$6.00/pack would be about US$5.9

million. The total tobacco tax revenue for 2021 is projected to be equivalent to US$4.2

million (0.37% of GDP), and the estimated retail price increase of a 20-cigarette pack would

contribute to decrease the number of cigarettes taxed by 9.4% in 2021.

Under the proposed Policy Option for OECS countries harmonization (Scenario 2, Table

5.13), with a uniform specific excise rate of EC$1.00 in 2019, the estimated tobacco excise

tax revenue would be close to US$0.8 million (0.08% of GDP); in 2020, with EC$2.00/per

pack, it would reach US$1.6 million (0.14% of GDP); and with EC$4.00 per pack tax in 2021,

US$2.9 million (0.25% of GDP). Total tobacco tax revenue projected would be US$0.9 (0.08%

of GDP) in 2019, US$1.7 million (0.15% of GDP) in 2020, and US$3.0 million (0.26% of GDP) in

2021. The increases would reduce the number of cigarettes taxed by 2.8% in 2019, 3.2% in

2020, and 8.6% in 2021.




BASELINE (2017): 20% AD VALOREM EXCISE TAX


2018 (PROJECTED): 20% AD VALOREM OF (CSC+ID) /20 CIGARETTES PACK


MAINTAIN 20% AD VALOREM AND ADOPT SPECIFIC EXCISE AT EC$1.50 PER PACK 2019 (SCENARIO 1)


MAINTAIN AD 20% VALOREM AND INCREASE SPECIFIC EXCISE AT EC$3.00 PER PACK 2020 (SCENARIO 1)


MAINTAIN 20% AD VALOREM AND INCREASE SPECIFIC EXCISE AT EC6.00 PER PACK 2021 (SCENARIO 1)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es)

0.04

50.

045

0.04

20.

040

0.03

6

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

8.84

9.00

11.6

14.0

18.8

Aver

age e

xcise

tax b

urde

n (e

xcise

tax a

s pe

rcen

tage

of p

rice)

0.86

0.85

14.13

22

.39

32

.7

Aver

age t

ax b

urde

n (to

tal t

ax -

impo

rt,

excis

e, an

d VA

T - a

s per

cent

age o

f pric

e)19

.7

19.6

32.0

39

.6

49.2

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$ 3.

27$3

.33

$4.2

8$5

.20

$6.9

7

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

3.8

3.8

81.7

157.2

307.2

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

* 1

0.00

010.

0002

0.00

340.

0063

0.01

11

Tota

l exc

ise ta

x rev

enue

(US$

mill

ion)

$ 0.

050.

00%

$0.0

60.

01%

$1.2

70.

12%

$2.3

30.

21%

$4.13

0.36

%

Tota

l tob

acco

gove

rnm

ent r

even

ue (i

mpo

rt du

ty, e

xcise

, and

VAT

, bill

ion

EC$)

20.

0003

0.00

040.

004

0.00

70.

011

Tota

l tob

acco

gove

rnm

ent r

even

ue (i

mpo

rt du

ty, e

xcise

, and

VAT

, US$

mill

ion)

*$

0.12

0.01

%$0

.140.

01%

$1.3

60.

13%

$2.4

20.

22%

$4.2

20.

37%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sales

ta

xed

(%)

0.0

-6.3

-5.1

-9.4

Table 5.12: St. Kitts and Nevis Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Scenario 1 Outputs 2019-2021

Source: WBG Staff estimates. * Source: Revenues Estimates, St. Kitts and Nevis Customs Department: Tobacco Excise Revenue (2016= EC$0.136 million; 2017 = EC$ 0.114 million) 1 The simulation model was adjusted, based on 2017 excise tax revenue which was confirmed with the St. Kitts and Nevis customs department reflecting the tax exemptions (No Taxes, No VAT under the hotel aids act) given to the main importer of duty-free shop cigarettes. Note that 2017 total tax revenue was lower than that of 2016, despite an increase in the total number of cigarettes imported. 2The simulation model assumes that the VAT is applied along the cigarette distribution chain from customs to wholesale and retail points of sale (except for goods entered under the hotel aids act).

60



BASELINE (2017): 20% AD VALOREM EXCISE TAX


2018 (PROJECTED): 20% AD VALOREM OF (CSC+ID)/20 CIGARETTES PACK


CONVERT THE 20% AD VALOREM EXCISE TAX TO SPECIFIC EXCISE AT EC$1.00 PER PACK 2019 (SCENARIO 2)


INCREASE 100% THE 2019 SPECIFIC EXCISE (EC$1.00/PER PACK) TO EC$2.00 PER PACK BY 2020 (SCENARIO 2)


INCREASE 100% THE 2020 SPECIFIC EXCISE FROM EC$2.00/PER PACK TO EC$4.00 PER PACK BY 2021 (SCENARIO 2)


Tota

l cig

aret

tes t

axed

(bill

ion

piec

es)

0.04

50.

045

0.04

370.

042

0.03

9

Aver

age c

igar

ette

pric

e (EC

$)/p

er p

ack

8.84

9.00

10.6

12.3

16.1

Aver

age e

xcise

tax b

urde

n (e

xcise

tax

as p

erce

ntag

e of p

rice)

0.86

0.85

9.7

16.5

24.9

Aver

age t

ax b

urde

n (to

tal t

ax -

impo

rt,

excis

e, an

d VA

T - a

s per

cent

age o

f pr

ice)

19.7

19.6

27.6

33.9

41.8

Aver

age c

igar

ette

pric

e (U

S$ p

er p

ack)

$ 3.

27$3

.33

$ 3.

92$4

.55

$5.9

6

Aver

age e

xcise

tax (

EC$

per 1

000

piec

es)

3.8

3.8

50.0

100.

020

0.0

Tota

l tob

acco

excis

e tax

reve

nue (

billi

on

EC$)

0.

0001

0.00

020.

0022

0.00

40.

008

Tota

l exc

ise ta

x rev

enue

(US$

mill

ion)

$0.0

50.

00%

$0.0

60.

01%

$0.8

10.

08%

$1.5

70.

14%

$2.8

60.

25%

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

SCS,

excis

e, an

d VA

T, b

illio

n EC

$)

0.00

030.

0004

0.00

20.

004

0.00

8

Tota

l tob

acco

gove

rnm

ent r

even

ue (I

D,

CSC,

excis

e, an

d VA

T, U

S$ m

illio

n)$0

.120.

01%

$0.14

0.01

%$0

.89

0.08

%$1

.65

0.15

%$2

.96

0.26

%

Perc

enta

ge ch

ange

in to

tal c

igar

ette

sa

les ta

xed

(%)

37.1

0.0

-2.8

-3.2

-8.6

Table 5.13: St. Kitts and Nevis Summary Cigarette Excise Tax GDP Impact - 2018 Forecast, and Proposed Policy Option 2 (Scenario 2) Outputs 2019-2021


62

CONCLUSIONS AND THE WAY FORWARD

6.1. ConclusionsThe scenarios presented in this report are meant to advance tobacco tax harmonization

in the OECS. Admittedly, there will still be some way to go to achieve the tobacco tax

burden benchmark set by the WHO and others. However, the policy options provide a

starting point for the countries to move towards reaching this benchmark. In fact, if the

suggestions are followed, they will result in significant changes to the current tobacco tax

structure for some of the selected countries.

For instance, in Scenario 1, countries will move in some cases, from an excise tax share

of 0% or close to 0% in 2018 to over 30% and 40% in 2021—a two-tiered harmonization

approach based on countries’ excise tax share starting points.

For Scenario 2, given the current excise tax positions of some of the countries, it is

important that all countries engage in some adjustment to their tax structures in

the interest of perceived fairness. Since St. Lucia’s current excise tax rate is EC$3.52,

the minimum specific excise tax target needed to be set above this rate to allow for

adjustments for this country. In a situation where at least one country has no excise

tax on the product, and two others close to none, setting the 2021 target significantly

above EC$3.52 may prove to be quite challenging for the countries with low or no excise

tax, since this will require substantial annual increases in the excise tax rates. The target

rate was therefore set at EC$4.00 (US$1.48), since forecasts showed that higher rates

would likely be burdensome. Scenario 2 further proposes that countries increase their

excise rates uniformly from the harmonized base of EC$4 in 2021 to EC$7.00 (2.70) per

pack of 20 cigarettes in 2025. This somewhat conservative approach in Scenario 2 is not

accidental, since a more aggressive stance may prove to be less politically feasible.

In fact ultimately, the report recommends the implementation of Scenario 2, although

the 2021 results for Scenario 1 may appear to be better than for Scenario 2, based

on consumption and revenue impacts. Scenario 2 is the better scenario from a

harmonization prospective, as it achieves a truly harmonized excise tax structure by 2021

while reducing consumption and increasing revenues. It thereafter proposes higher

excise tax rates on the product, albeit, in the longer term.

6


63 // Conclusions and the Way Forward


It is also important to note that while Scenario 1 shows higher revenues and greater

consumption reductions, it does not achieve complete excise tax harmonization, which

is the major objective of the study. To choose Scenario 1 based on the level of revenues

collected and the reduction in consumption would be to shift the objective of the study.

Scenario 2 offers the more measured way of achieving harmonization in the short term

(2021), while targeting consumption reduction and increased revenues in the medium-

to-long term (2022-2025).

The fact is that it is Scenario 2 which initiates the harmonization of excise taxes in a more

targeted fashion across the sub-region, with all countries implementing a minimum

specific excise tax by a specified time. The second Scenario also appears to align more

closely with the overall policy objective of more effective tobacco control and prevention

over the longer period. Scenario 2 is also superior to Scenario 1 in that, while Scenario 1

will maintain the current, vastly diverse application of excise taxes on tobacco, Scenario 2,

by taking us closer to harmonized excise tax structures, will lessen the incentive for cross-

country trade in tobacco and thereby reduce tobacco consumption even more.

6.2. The Way ForwardGiven that the current tax structure of the OECS countries is characterized by five main

tobacco-related taxes, it may be desirable to pursue a simplification of all these taxes

across the sub-region. In this study, however, the short-to-medium-term strategy will be

to achieve harmonization of excise taxes across the region. Harmonization in this sense

will require that all countries levy a minimum specific excise tax at the same rate, by a

specified time (2021).

The wide variations in both the tobacco tax structures and the prices of tobacco, together

with the proximity of the countries of the OECS, creates the potential for smuggling but

also strengthens the case for harmonization. Because of the very low tobacco prices

in some countries, harmonization that also aims at a significant reduction in tobacco

consumption will call for higher taxes.

It will be important for each country to mount a campaign to educate the public about the

intent of the proposed tax increases, emphasizing the deleterious effects of tobacco both

on population health and on the economy. The harmonization proposal should then be laid

before two regional meetings for adoption—the regional meeting of the OECS Ministers of

Health and the meeting of the OECS Ministers of Finance—prior to implementation by the

individual countries. The proposal will include a sustained increase in taxes until targeted

tax/price ratios are attained. This means that countries will move closer to FCTC compliance

by a harmonization process carried out in stages. The region may benefit from considering

the experience of the Southern African Customs Union and the European Union as it moves

from one stage of harmonization to the other (See Box 6.1).

64


BOX 6.1: LESSONS LEARNED FROM THE TOBACCO TAX HARMONIZATION IN THE SOUTHERN AFRICAN CUSTOMS UNION (SACU)

a. For many years South Africa was regarded as a model of good practice for tobacco

control. South Africa was one of the first middle-income countries to use increases in

the excise tax on tobacco products as a tobacco control strategy. The public health

benefits are very substantial and will be increasingly reaped in years to come. The BLNS1

countries benefited from South Africa’s strategy, even though their influence on this

decision was minor. The lesson for the OECS is that, in a closely-knit grouping like SACU,

the initiative and influence of one-member country can have benefits for all member

countries, if the tobacco control policy of the influencing member is sound.

b. Because the excise tax is the same, and retail prices are similar in SACU (Botswana

excluded, but see below), there is no incentive for cross-border shopping and

bootlegging between the member countries. As in most countries, the tobacco industry

is very vocal about the illicit trade in cigarettes, real or imagined. However, if the excise

tax is the same across countries, they cannot argue that illicit trade is driven by tax

differences between countries.

c. While the excise tax is the same across all member countries, there is nothing in the

SACU agreement that prevents member states imposing additional taxes or levies.

Botswana has done this with success, when they introduced the additional levy in 2014.

The lesson is that the excise tax agreement between the members of a regional bloc

(like the OECS) should set a floor, or a minimum, but that individual countries should be

allowed to levy a higher tax, should they deem this necessary.

The fact that four of the SACU members share a de facto common currency simplifies matters, but

if this is not the case (as is the case for Botswana) it does not make the harmonisation of the excise

taxes unworkable. In the OECS, many countries share a common currency, but others have their

own currencies. This should not be an impediment to a common excise tax regime between the

various member states.

1BLNS: Botswana, Lesotho, Namibia, and Swaziland

Making use of the experience of the EU, the harmonization of taxes can be approached

in stages. For example, there can be agreement on harmonizing the tax structure

and base in one stage, whilst agreement on minimum excise duty rates for different

categories of tobacco products can be determined at subsequent stages. According

to World Bank 2017, an important decision taken by the EU on the road to successful

tobacco tax harmonization was ‘agreeing on relatively high minimum (excise tax) rates


65 // Conclusions and the Way Forward


with transitional periods for some Member States.’ The experience of the Southern

African Customs Union (SACU) also points to success in implementing a fixed excise tax

rate across countries, while allowing individual countries to have an additional levy on

tobacco products if they want to increase the tax burden Underpinning these actions,

however, will be the accompanying legislation, without which harmonization cannot be

accomplished.

Although the proposed harmonization may involve a long, difficult process, the case for

it remains a very strong one, given the extent of the variation and the low levels of tax

rates that now prevail in most OECS countries. With the harmonization bringing higher

rates of tobacco taxation to all countries, and by standardizing the tobacco consumption

environment, the region as a whole would be moving much closer to full compliance

with the FCTC requirements.

66

Advancing Action on the Implementation of Tobacco Tax Harmonization in the Organization of Eastern Caribbean States (OECS) CountriesAdvancing Action on the Implementation of Tobacco Tax Harmonization in the Organization of Eastern Caribbean States (OECS) Countries

REFERENCES

Caribbean Centre for Money and Finance. (2016). Caribbean Performance Economic Report.

Caribbean Community Secretariat. (2001). Revised Treaty of Chaguaramas Establishing

the Caribbean Community Including the Caricom Single Market and Economy. Retrieved

April 9, 2018 from: http://www.caricad.net/wp-content/uploads/2016/12/Revised-Treaty-

of-Chaguaramas.pdf

Eastern Caribbean Central Bank. (2017). Eastern Caribbean Central Bank. Retrieved

December 2, 2018 from https://www.eccb-centralbank.org/

Global Youth Tobacco Survey. (2010). St. Kitts and Nevis (Ages 13-15) (GYTS) Fact Sheet.

Retrieved December 6, 2017 from http://apps.who.int/fctc/implementation/database/

sites/implementation/files/documents/reports/St.%20Kitts%20%26%20Nevis%20

GYTS%202010%20Factsheet%20%28Ages%2013-15%29.pdf

Healthy Caribbean Coalition. (2016). Civil Society Led Tobacco Control Advocacy

in the Caribbean: Experience from the Jamaica Coalition for Tobacco Control.

Retrieved December 6, 2017 from https://www.healthycaribbean.org/wp-content/

uploads/2016/12/Civil-Society-Led-Tobacco-Control-Advocacy-in-the-Caribbean-

Dec-2016.pdf

International Development Bank. (2017). Revisting Fiscal Challenges. Caribbean Region

Quarterly Bulletin, 6(3) September.

International Monetary Fund. (2016). IMF Country Report No. 16/244: Dominica.

Washington D.C.

International Trade Centre. (2018). Trade Map - Trade Statistics for International Business

Development. Retrieved December 1, 2017 from https://www.trademap.org/Index.aspx.

Organisation of Eastern Caribbean States (2010). Revised Treaty of Basseterre Establishing

the Organisation of Eastern Caribbean States Economic Union. Retrieved June 7, 2018

from http://foreign.gov.vc/foreign/images/stories/Foreign_Affairs/Article_pdf/revised-

treaty-of-basseterre.pdf.

Pan American Health Organization. (2016). Report on Tobacco Control for the

Region of the Americas. WHO Framework Convention on Tobacco Control: 10

Years Later. Retrieved June 7, 2018 from http://iris.paho.org/xmlui/bitstream/

handle/123456789/28393/9789275118863_eng.pdf?sequence=1&isAllowed=y.

http://www.caricad.net/wp-content/uploads/2016/12/Revised-Treaty-of-Chaguaramas.pdf

http://www.caricad.net/wp-content/uploads/2016/12/Revised-Treaty-of-Chaguaramas.pdf

https://www.eccb-centralbank.org/

http://apps.who.int/fctc/implementation/database/sites/implementation/files/documents/reports/St.%20Kitts%20%26%20Nevis%20GYTS%202010%20Factsheet%20%28Ages%2013-15%29.pdf



ttps://www.healthycaribbean.org/wp-content/uploads/2016/12/Civil-Society-Led-Tobacco-Control-Advocacy-in-the-Caribbean-Dec-2016.pdf



https://www.trademap.org/Index.aspx

http://foreign.gov.vc/foreign/images/stories/Foreign_Affairs/Article_pdf/revised-treaty-of-basseterre.pdf

http://foreign.gov.vc/foreign/images/stories/Foreign_Affairs/Article_pdf/revised-treaty-of-basseterre.pdf

http://iris.paho.org/xmlui/bitstream/handle/123456789/28393/9789275118863_eng.pdf?sequence=1&isAllowed=y

http://iris.paho.org/xmlui/bitstream/handle/123456789/28393/9789275118863_eng.pdf?sequence=1&isAllowed=y


67 // References


Pan American Health Organization, World Health Organization, and Caribbean Community Secretariat. (2011). Strategic Plan of Action for the Prevention and Control of Non-Communicable Diseases for Countries of the Caribbean Community. Retrieved June 7, 2018 from http://www.archive.healthycaribbean.org/publications/documents/CARICOM-NCD-Plan-2011-2015.pdf.

Ross, H., Shariff, S., and Gilmore, A. (2009). Economics of Tobacco Taxation in Ukraine. Paris: International Union Against Tuberculosis and Lung Disease.

The Global Youth Tobacco Survey Collaborative Group . (2002). Tobacco use among youth: a cross country comparison. Tobacco Control, 252-270.

The Tobacco Atlas. (2017). The Tobacco Atlas. Retrieved December 6, 2017, from http://www.tobaccoatlas.org/country-data/antigua-and-barbuda/

van Walbeek, Corné. (2005). The Economics of Tobacco Control in Jamaica:Will the Pursuit of Public Health Place a Fiscal Burden on the Government?”Presentation to the Public Forum, Jamaica Pegasus Hotel, April 15.

The World Bank. (2017). The World Bank. Retrieved December 6, 2017, from The World Bank web site: http://siteresources.worldbank.org/LACEXT/Resources/Factsheet_eng1.pdf

World Health Organization. (2018). Tobacco Key Facts. Retrieved May 11, 2018 from http://www.who.int/news-room/fact-sheets/detail/tobacco

World Health Organization. (2017). WHO Report on the Global Tobacco Epidemic. Geneva: WHO.

http://www.archive.healthycaribbean.org/publications/documents/CARICOM-NCD-Plan-2011-2015.pdf

http://www.archive.healthycaribbean.org/publications/documents/CARICOM-NCD-Plan-2011-2015.pdf

http://www.tobaccoatlas.org/country-data/antigua-and-barbuda/

http://www.tobaccoatlas.org/country-data/antigua-and-barbuda/

http://siteresources.worldbank.org/LACEXT/Resources/Factsheet_eng1.pdf

http://siteresources.worldbank.org/LACEXT/Resources/Factsheet_eng1.pdf

http://www.who.int/news-room/fact-sheets/detail/tobacco

68

Advancing Action on the Implementation of Tobacco Tax Harmonization in the Organization of Eastern Caribbean States (OECS) CountriesAdvancing Action on the Implementation of Tobacco Tax Harmonization in the Organization of Eastern Caribbean States (OECS) Countries

ANNEX 1 TO 3: OECS EXCISE TAX HARMONIZATION: SIMULATION ASSUMPTIONS

Annex I: OECS Macro-Economic Indicators;

Annex II: OECS Simulation Assumptions: Price and Income Elasticity;

Annex III: Tax Scenarios – Current and Proposed Scenarios - Cigarette Excise Tax Structure

69 // Annex 1 to 3: OECS Excise Tax Harmonization: Simulation Assumptions


OEC

S M

EMBE

RS20

1020

1120

1220

1320

1420

1520

1620

17

ACTU

AL20

18

FORE

CAS

T20

19

FORE

CAS

T20

20

FORE

CAS

T20

21

FORE

CAS

T

Aver

age E

xcha

nge r

ate E

C$/

1US$

(Est

imat

e)2.

70

2.70

2.

702.

70

2.70

2.

70

2.70

2.

70

2.70

2.

70

2.70

2.

70

Mac

roec

onom

ic da

ta 1

Antig

ua an

d Ba

rbud

a

GD

P at

mar

ket p

rices

(Cur

rent

U

S$ m

illio

n) 1

1,152

.51,1

42.0

1,211.

41,1

92.9

1,280

.11,3

64.9

1,460

1,532

1,657

1,768

1,741

1,811

GD

P (c

urre

nt E

C$ b

illio

n)1

3.11

3.08

3.27

3.22

3.46

3.69

3.94

4.14

4.48

4.77

4.70

4.9

Real

GD

P gr

owth

rate

**-8

.56%

-2.2

2%3.

01%

1.59%

5.34

%3.

79%

5.36

%4.

42%

5.63

%4.

25%

2%2%

Real

GD

P pe

r cap

ita gr

owth

(a

nnua

l%) 2

-8.3

%-3

.2%

2.4%

-1.2

%4.

0%3.

0%4.

3%1.7

%1.7

%1.7

%2.

94%

2.94

%

St. K

itts a

nd N

evis

GD

P at

mar

ket p

rices

(Cur

rent

U

S$ m

illio

n) 1

705.

075

3.2

734.

578

8.2

847.8

878.

390

9.9

945.

91,0

03.9

1,051

.91,0

99.0

1,153

.0

GD

P (c

urre

nt E

C$ b

illio

n) 1

1.90

2.03

1.98

2.13

2.29

2.37

2.5

2.6

2.7

2.8

3.0

3.11

Real

GD

P gr

owth

rate

**-2

.2%

2.4%

-0.6

%6.

2%6.

0%4.

0%2.

2%1.7

%3.

4%2.

7%2.

70%

2.70

%

Real

GD

P pe

r cap

ita gr

owth

(a

nnua

l%)2

-3.3

%1.3

%-1

.7%5.

1%4.

8%2.

9%1.2

%6.

5%5.

0%6.

9%4.

00%

3.67

%

Gre

nada

GD

P at

mar

ket p

rices

(Cur

rent

U

S$ m

illio

n) 1

771.0

277

8.65

799.

8884

2.62

911.4

899

7.01

1,056

.21,1

18.8

1,170

.51,2

23.5

1,269

1,332

GD

P (c

urre

nt E

C$ b

illio

n)1

2.08

2.10

2.16

2.28

2.46

2.69

2.85

3.02

3.16

3.30

3.43

3.6

Real

GD

P gr

owth

rate

**-0

.51%

0.76

%-1

.16%

2.35

%7.3

4%6.

44%

3.68

%3.

73%

2.82

%2.

69%

3%3%

Real

GD

P pe

r cap

ita gr

owth

(a

nnua

l%)2

-0.9

%0.

4%-1

.5%

1.9%

6.8%

5.8%

3.7%

1.9%

2.3%

1.3%

4.22

%4.

46%

Annex I - Table 1: OECS Macro-Economic Indicators

70


OEC

S M

EMBE

RS20

1020

1120

1220

1320

1420

1520

1620

17

ACTU

AL20

18

FORE

CAS

T20

19

FORE

CAS

T20

20

FORE

CAS

T20

21

FORE

CAS

T

Aver

age E

xcha

nge r

ate E

C$/1

US$

(E

stim

ate)

2.70

2.70

2.70

2.70

2.70

2.70

2.70

2.70

2.70

2.70

2.70

2.70

Mac

roec

onom

ic da

ta 1

St. L

ucia

GD

P at

mar

ket p

rices

(Cur

rent

U

S$ m

illio

n)1

1,382

.01,4

37.7

1,436

.81,4

89.9

1,551

.91,6

49.1

1,667

.11,7

12.3

1,772

.41,8

34.4

1,900

1,955

GD

P (c

urre

nt E

C$ b

illio

n) 1

3.73

3.88

3.88

4.02

4.19

4.45

4.50

4.62

4.79

4.95

5.13

5.3

Real

GD

P gr

owth

rate

**-1

.62%

0.63

%0.

18%

3.39

%-0

.22%

1.96%

1.65%

2.69

%2.

71%

2.56

%2%

2%

Real

GD

P pe

r cap

ita gr

owth

(a

nnua

l%)2

-1.1%

2.3%

-1.5

%-0

.6%

-1.6

%1.3

%0.

4%1.8

%2.

1%1.7

%2.

32%

2.29

%

St. V

ince

nt an

d th

e Gre

nadin

es

GD

P at

mar

ket p

rices

(Cur

rent

U

S$ m

illio

n)1

681.2

676.

169

2.9

721.2

727.2

755.

276

5.4

789.

581

5.3

842.

393

097

2

GD

P (c

urre

nt E

C$ b

illio

n)1

1.84

1.83

1.87

1.95

1.96

2.04

2.07

2.13

2.20

2.27

2.51

2.6

Real

GD

P gr

owth

rate

**0.

93%

-0.75

%2.

49%

4.08

%0.

58%

4.30

%1.1

6%3.

15%

3.27

%3.

31%

3%3%

Real

GD

P pe

r cap

ita gr

owth

(a

nnua

l%) 2

-3.4

%-0

.4%

1.4%

1.8%

1.2%

1.3%

1.4%

2.2%

2.7%

2.8%

4.41

%4.

46%

** Data Source: 2010-2019, Eastern Caribbean Central Bank; 2020-2021, IMF 1Source: data for the years 2010-2015 were sourced from the World Bank’s database; data for the years 2016-2019 were provided by the Eastern Caribbean Central Bank (ECCB); and data for the years 2020-2021 were sourced from the IMF Data Mapper Database. 2WBG staff estimates



Annex II - Table 1: OECS Excise Tax Harmonization: Simulation Assumptions: Price (-0.6/-0.4 range) and Income Elasticity (0.9/0.5 range) for Upper Middle-Income Countries (UMIC

To estimate the impact of the change in the retail price on consumption, the crucial parameters are:

ũ Price elasticity of demand: The greater the price elasticity, the greater the

decrease in the consumption of cigarettes in response to a given percentage

change in the price (price elasticity falls in the inelastic range, but closer to -1

than zero).

ũ Income elasticity of demand: The greater the income elasticity may lead to

greater consumption of cigarettes in response to a given percentage change in

income (income elasticity tends to be unit elastic or somewhat more elastic).

ũ St. Lucia VAT (12% - 2017) is equivalent to 10.7% of final retail price;

ũ Grenada VAT (15%) is equivalent to 13.04% of final retail price;

ũ St. Vincent and the Grenadines (16% -2017) is equivalent to 13.79% of final retail

price;

ũ It is assumed that to protect the profit margins, the importers, and distributors,

pass-through the tax increase to the consumer’s price increase.

72


Price elasticity:

Price elasticity of demand for high-income countries

(HIC) is estimated to be -0.4 and between -0.6 and

-0.8 in low and middle income countries (LMIC)

(IARC, 2014).

Assumptions:

Note: For the OECS members classified as Upper Middle-income countries (UMIC) by

the WBG (Grenada, St. Lucia, St., Vincent and the Grenadines), this assumption adopts

the ranges found in a study carried out on price and income elasticities of demand in

Jamaica (UMIC) in 2004 (“Economics of tobacco control in Jamaica: will the pursuit of

public health place a fiscal burden on the government?”; Article · January 2004; Corne

van Walbeek, University of Cape Town):

ũ “likely range for the true value of the price elasticity of demand is between –0.3

and –0.6”

ũ Van Walbeek found statistically significant ranges for income elasticity in

Jamaica between 0.51 and 0.89

4%

+10%

8%

LMC

PRICE CHANGE

CONSUMPTIONCHANGE

HIC

Price elasticity for Economy cigarettes Value (must be negative) -0.6

Price elasticity for medium cigarettes Value (must be negative) -0.5

Price elasticity for premium cigarettes Value (must be negative) -0.4

Income elasticity for Economy cigarettes Value (typically positive) 0.9

Income elasticity for medium cigarettes Value (typically positive) 0.7

Income elasticity for premium cigarettes Value (typically positive) 0.5



Annex II - Table 2: OECS Excise Tax Harmonization: Price (-0.5/-0.3 range) and Income Elasticity (0.8/0.4 range) for High Income Countries

To estimate the impact of the change in the retail price on consumption, the crucial parameters are:

ũ Price elasticity of demand: The greater the price elasticity, the greater the

decrease in the consumption of cigarettes in response to a given percentage

change in the price (price elasticity falls in the inelastic range, but closer to -1

than zero).

ũ Income elasticity of demand: The greater the income elasticity may lead to

greater consumption of cigarettes in response to a given percentage change in

income (income elasticity tends to be unit elastic or somewhat more elastic).

ũ St. Kitts and Nevis VAT (17% - 2017) is equivalent to 14.53% of final retail price;

ũ Antigua and Barbuda VAT (15%) is equivalent to 13.04% of final retail price;

ũ It is assumed that to protect the profit margins, the importers, and distributors,

pass-through the tax increase to the consumer’s price

74


Price elasticity:

Price elasticity of demand for high-income countries

(HIC) is estimated to be -0.4 and between -0.6 and

-0.8 in low and middle income countries (LMIC)

(IARC, 2014).

Meta-analyses of the relationship between tobacco

prices and use suggest that the overall elasticity of

demand for adults lies between -0.3 and -0.7 (CBO

2012, IARC 2011, Gallet and List 2003, Chaloupka

and Warner 2000)

Assumptions:

Note: Price and income elasticity adopted for St. Kitts and Nevis, and Antigua and

Barbuda are comparable to high income countries (HIC), since both counties are

recognized as high-income economies by the World Bank. *

* Source: World Bank list of economies (June 2017)

4%

+10%

8%

LMC

PRICE CHANGE

CONSUMPTIONCHANGE

HIC

Price elasticity for Economy cigarettes Value (must be negative) -0.5

Price elasticity for medium cigarettes Value (must be negative) -0.4

Price elasticity for premium cigarettes Value (must be negative) -0.3

Income elasticity for Economy cigarettes Value (typically positive) 0.8

Income elasticity for medium cigarettes Value (typically positive) 0.6

Income elasticity for premium cigarettes Value (typically positive) 0.4



GRE

NAD

A TA

X D

ESC

RIPT

ION

*

ACTU

AL

ACTU

AL

FORE

CAS

T

MAI

NTA

IN T

HE

105%

AD

VAL

ORE

M E

XCIS

E C

IF/

CU

STO

MS

DU

TY P

ER 2

0 C

IGAR

ETTE

S PA

CK,

AN

D

ADO

PT E

C$1

.75

SPEC

IFIC

EXC

ISE

TAX

PER

20 C

/PA

CK

-201

9, (S

CEN

ARIO

1)

MAI

NTA

IN T

HE

105%

AD

VAL

ORE

M E

XCIS

E C

IF/

CU

STO

MS

DU

TY P

ER 2

0 C

IGAR

ETTE

S PA

CK,

AN

D

INC

REAS

E TH

E SP

ECIF

IC E

XCIS

E TA

X TO

EC

$2.6

3 PE

R 20

C/P

ACK

-202

0, (S

CEN

ARIO

1)

MAI

NTA

IN T

HE

105%

AD

VAL

ORE

M E

XCIS

E C

IF/

CU

STO

MS

DU

TY P

ER 2

0 C

IGAR

ETTE

S PA

CK,

AN

D

INC

REAS

E TH

E SP

ECIF

IC E

XCIS

E TA

X TO

EC

$3.9

4 PE

R 20

C/P

ACK

-202

1, (S

CEN

ARIO

1)

REP

LAC

E TH

E AD

VAL

ORE

M E

XCIS

E TA

X TO

SP

ECIF

IC E

XCIS

E TA

X RA

TE T

O E

C$2

.70

PER

PAC

K 20

19 (S

CEN

ARIO

2)

INC

REAS

E TH

E 20

19 S

PEC

IFIC

EXC

ISE

TAX

RATE

30

% TO

EC

$3.5

0 PE

R PA

CK

2020

(SC

ENAR

IO 2

)

INC

REAS

E TH

E 20

20 S

PEC

IFIC

EXC

ISE

TAX

RATE

BY

14%

TO E

C$4

.00

PER

PAC

K 2

021 (

SCEN

ARIO

2)

TAX

BASE

2016

2017

2018

TAX (% OR TT$)

Import Duty (ID)/common external tariff

(CET) 1

35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%CIF (Cost,

Insurance and Freight)

Value Added Tax (VAT) 2 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%

After CIF + ID/CET +CSC+ Excise Tax & wholesale & distribution

chain

Current Excise Tax Structure Proposed Excise Tax Levels (WBG/HEU-UWI)

Simple Specific

excise tax

- - - 1.75 2.63 3.94 2.70 3.50 4.00 Per pack of 20s,

- - - 87.50 131.25 196.88 135.00 175.00 200.00 or per 1000 cigarettes

Ad valorem excise tax % 105% 105% 105% 105% 105% 105%

Per pack of 20 cigarettes after CIF +(ID/CET)

+ CSC

Customs service charge

(CSC) % 6% 6% 6% 6% 6% 6% 6% 6% 6%

Declared (CIF) on invoice value

reported by importer + CET (No exceptions to CARICOM

members)

Annex III - Table 1: OECS Excise Tax Harmonization: Grenada Tax Scenarios – Current and Proposed Scenarios, Cigarette Excise Tax Structure Actual 2016-2017 & Forecast 2018 - 2021

*Source: OESC Tax Systems Structure, Grenada; HEU, Centre for Health Economics, The University of the West Indies 1 Note: Cigarette imports from CARICOM member countries (i.e., Trinidad and Tobago) are exempted of Common External Tariff (CET); Note: The fiscal year in Grenada matches the calendar year 2 The simulation model assumes that the VAT is applied along the cigarette distribution chain from customs/ex-factory, to, wholesale, and retail points of sale.

76


ST. L

UC

IA TA

X SY

STEM

DES

CRI

PTIO

N*

ACTU

AL

2016

ACTU

AL

2017

FORE

CAS

T

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

018

INC

REAS

ED B

Y 20

% IN

201

9 TO

EC

$4.2

2 PE

R PA

CK

(SC

ENAR

IO 1)

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

019

INC

REAS

ED B

Y 25

% IN

202

0 TO

EC

$5.2

8 PE

R PA

CK

(SC

ENAR

IO 1)

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

020

INC

REAS

ED B

Y 25

% IN

202

1 TO

EC

$6.6

0 PE

R PA

CK

(SC

ENAR

IO 1)

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

018

INC

REAS

ED B

Y 4%

IN 2

019

TO E

C$3

.65

PER

PAC

K (S

CEN

ARIO

2)

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

019

INC

REAS

ED B

Y 4%

IN 2

020

TO E

C$3

.80

PER

PAC

K (S

CEN

ARIO

2)

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

020

INC

REAS

ED B

Y 5%

IN 2

021 T

O E

C$4

.00

PER

PAC

K (S

CEN

ARIO

2)

TAX

BASE

2016

2017

2018

TAX (% OR EC$)

Import Duty (Common

External Tariff - CET) 1

45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0%CIF (Cost,


Value Added Tax (VAT) 2 15.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%

After CIF + Import Duty (CET) + CSC + and Tobacco

Excise, wholesale & distribution

chain


Simple Specific

excise tax

3.52 3.52 3.52 4.22 5.28 6.60 3.65 3.80 4.00 Per pack of 20s,

176.00 176.00 176.00 211.20 264.00 330.00 182.50 190.00 200.00 or per 1000 cigarettes

Customs service

charge(CSC) %

6% 6% 6% 6% 6% 6% 6% 6% 6%

Declared (CIF+ID)/Ex-factory value set by importer/producer

Annex III - Table 2: OECS Excise Tax Harmonization: St. Lucia Tax Scenarios – Current and Proposed Scenarios, Cigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021

*Source: OECS Tax Systems Structure, St. Lucia; HEU, Centre for Health Economics, The University of the West Indies

The fiscal year in St. Lucia runs from March to April. For conciseness, in this report the fiscal year is reported as the latter year. For example, fiscal 2016/17 is reported as 2017 in the text, figures, and tables.1 Note: Cigarette imports from CARICOM member countries that meet the qualifying conditions, are exempted from Common External Tariff (CET);2 The simulation model assumes that the VAT is applied along the cigarettes distribution chain from customs/ex-factory, wholesale, and retail point of sale



ST. V

INC

ENT

AND

TH

E G

REN

ADIN

ES TA

X SY

STEM

D

ESC

RIPT

ION

*

ACTU

AL

2015

ACTU

AL

2016

ACTU

AL

2017

FORE

CAS

T

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

018

INC

REM

ENTE

D

150%

TO

EC

$0.7

8 PE

R 20

CIG

ARET

TES

PAC

K IN

201

9 (S

CEN

ARIO

1)

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

019

INC

REAS

ED B

Y 15

0% T

O E

C$1

.94

PER

20 C

IGAR

ETTE

S PA

CK

IN 2

020

(SC

ENAR

IO 1)

SPE

CIF

IC E

XCIS

E TA

X RA

TE 2

020

INC

REAS

ED B

Y 15

0% T

O E

C$4

.84

PER

20 C

IGAR

ETTE

S PA

CK

IN 2

021

(SC

ENAR

IO 1)

SPE

CIF

IC E

XCIS

E TA

X O

F EC

$0.3

1 PER

PAC

K IN

20

18 IS

INC

REAS

ED 14

2% T

O E

C$0

.75

PER

PAC

K IN

20

19 (S

CEN

ARIO

2)

SPE

CIF

IC E

XCIS

E TA

X O

F EC

$ 0.

75 P

ER P

ACK

IN

2019

IS IN

CRE

ASED

147%

TO

EC

$1.8

5 PE

R PA

CK

IN

2020

(SC

ENAR

IO 2

)

SPE

CIF

IC E

XCIS

E TA

X O

F $1

.85

PER

PAC

K IN

202

0 IS

INC

REAS

ED 11

6% T

O E

C$4

.00

PER

PAC

K IN

202

1 (S

CEN

ARIO

2)

TAX

BASE

2015

*

2016

*

2017

*

2018

TAX (% OR EC$)

Import Duty (Common

External Tariff - CET) 1

35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%CIF (Cost,


Value Added Tax (VAT) 2** 15.0% 15.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0%

After CIF + Import Duty (CET) + CSC and Tobacco

Excise, wholesale & distribution

chain


Simple Specific

excise tax

0.31 0.31 0.31 0.31 0.78 1.94 4.84 0.75 1.85 4.00 Per pack of 20s,

1.55 1.55 1.55 1.55 3.88 9.69 24.22 3.75 9.25 20.00 or per 100 cigarettes

Customs service charge

(CSC) % ** 4% 4% 5% 5% 5% 5% 5% 5% 5% 5%

CIF + Import Duty (CET)+

Excise tax

Annex III - Table 3: OECS Excise Tax Harmonization: St. Vincent and the Grenadines Tax Scenarios – Current and Proposed Scenarios Cigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021

*Source: OECS Tax Systems Structure, St. Vincent and the Grenadines; HEU, Centre for Health Economics, The University of the West Indies Note: The fiscal year in St. Vincent and the Grenadines matches the calendar year 1Note: Cigarette imports from CARICOM member countries that meet the qualifying conditions are exempted from Common External Tariff (CET); ** 16% VAT & 5% CSC effective 2017 2The simulation model assumes that the VAT is applied along the cigarette distribution chain from customs/ex-factory to, wholesale and retail points of sale.

78


Annex III - Table 4: OECS Excise Tax Harmonization: Antigua and Barbuda Tax Scenarios – Current and Proposed Scenarios, Cigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021

ANTI

GU

A AN

D B

ARBU

DA

TAX

DES

CRI

PTIO

N* AC

TUAL

20

15

ACTU

AL

2016

ACTU

AL

2017

FORE

CAS

T

AD

OPT

SPE

CIF

IC E

XCIS

E TA

X RA

TE A

T C

$1.5

0 PE

R PA

CK

2019

(SC

ENAR

IO 1)

INC

REAS

E TH

E SP

ECIF

IC E

XCIS

E FR

OM

EC

$1.5

0 IN

201

9 TO

EC

$3.0

0 IN

202

0 (S

CEN

ARIO

1)

INC

REAS

E TH

E SP

ECIF

IC E

XCIS

E FR

OM

EC

$3.0

0 IN

202

0 TO

EC

$6.0

0 IN

202

1 (SC

ENAR

IO 1)

AD

OPT

SPE

CIF

IC E

XCIS

E TA

X RA

TE A

T C

$0.8

0 PE

R PA

CK

2019

(SC

ENAR

IO 2

)

INC

REAS

E TH

E SP

ECIF

IC E

XCIS

E 13

8% F

ROM

EC

$0.8

0 IN

201

9 TO

EC

$1.9

0 IN

202

0 (S

CEN

ARIO

2)

INC

REAS

E TH

E 20

20 S

PEC

IFIC

EXC

ISE

FRO

M

EC$1

.90

BY 11

1% T

O E

C$4

.00

BY 2

021 (

SCEN

ARIO

2)

TAX

BASE

2015

2016

*

2017

2018

TAX (% OR EC$)

Import Duty (ID) 1 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

CIF (Cost, Insurance and

Freight)

Value Added Tax (VAT) 2 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%

After CIF + Import Duty

+ RRC + Excise Tax & wholesale & distribution

chain


Simple Specific

excise tax

- - - 1.50 3.00 6.00 0.80 1.90 4.00 Per pack of 20s

75.00 150.00 300.00 40.00 95.00 200.00 or per 1000 cigarettes

Revenue Recovery Charge (RRC)

10% 10% 10% 10% 10% 10% 10% 10% 10% 10%Import

Invoice (CIF)/reported value

by importer

Source: -OECS Tobacco Tax Systems; HEU, Centre for Health Economics, The University of the West Indies 1 Note: Cigarette imports from CARICOM member countries that meet the qualifying conditions, are exempted from Common External Tariff (CET); The fiscal year in Antigua and Barbuda coincides with the calendar year. 2The simulation model assumes that the VAT is applied along the cigarette distribution chain from customs (CIF+ID) + RRC + proposed excise taxes to, wholesale, and retail points of sale.



ST. K

ITTS

AN

D N

EVIS

TAX

DES

CRI

PTIO

N*

ACTU

AL

2015

ACTU

AL

2016

ACTU

AL

2017

-18

MAI

NTA

IN 2

0% A

D V

ALO

REM

AN

D A

DO

PT

SPEC

IFIC

EXC

ISE

AT E

C$1

.50

PER

PAC

K 20

19

(SC

ENAR

IO 1)

MAI

NTA

IN A

D 2

0% V

ALO

REM

AN

D IN

CRE

ASE

SPEC

IFIC

EXC

ISE

AT E

C$3

.00

PER

PAC

K 20

20

(SC

ENAR

IO 1)

MAI

NTA

IN 2

0% A

D V

ALO

REM

AN

D IN

CRE

ASE

SPEC

IFIC

EXC

ISE

AT E

C$6

.00

PER

PAC

K 20

21

(SC

ENAR

IO 1)

CO

NVE

RT T

HE

20%

AD V

ALO

REM

EXC

ISE

TAX

TO S

PEC

IFIC

EXC

ISE

AT E

C$1

.00

PER

PAC

K 20

19

(SC

ENAR

IO 2

)

INC

REAS

E 10

0% T

HE

2019

SPE

CIF

IC E

XCIS

E (E

C$1

.00/

PER

PAC

K) T

O E

C$2

.00

PER

PAC

K BY

20

20 (S

CEN

ARIO

2)

INC

REAS

E 10

0% T

HE

2020

SPE

CIF

IC E

XCIS

E FR

OM

EC

$2.0

0/PE

R PA

CK

TO E

C$4

.00

PER

PAC

K BY

202

1 (S

CEN

ARIO

2)

TAX

BASE

2015

*

2016

*

2017

/ 201

8

TAX (KG., % OR EC$)

Import Duty (ID)/

Common External

Tariff (CET) 1

EC$18.00 /Kg. **

EC$18.00 /Kg.

EC$18.00 /Kg.

EC$18.00 /Kg.

EC$18.00 /Kg.

EC$18.00 /Kg.

EC$18.00 /Kg.

EC$18.00 /Kg.

EC$18.00 /Kg.

EC$ per Kilogram

Value Added Tax

(VAT) 217.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0%

After Import Duty (CET) + Excise Tax + Customs

Service Charge (CSC)

& wholesale & distribution

chain


Simple Specific

excise tax

1.50 3.00 6.00 1.00 2.00 4.00 Per pack of 20s,

- - - 75.00 150.00 300.00 100.00 200.00 350.00 or per 1000 cigarettes

Ad valorem excise tax% 3

20% 20% 20% 20% 20% 0% 0% 0% 0% Import Duty (CET) + CSC

Customs service

charge% 6% 6% 6% 6% 6% 6% 6% 6% 6% Import Duty

tax (CET)

Annex III - Table 5: OECS Excise Tax Harmonization: St. Kitts and Nevis Tax Scenarios – Current and Proposed Scenarios, Cigarette Excise Tax Structure Actual 2015-2017 and Forecast 2018 – 2021

*Source: OECS Tobacco Tax Systems; HEU, Centre for Health Economics, The University of the West Indies ** It is assumed that the base for the CET per Kg is equivalent to 1,000 sticks. 1Note: Cigarette imports from CARICOM member countries that meet the qualifying conditions, are exempted from Common External Tariff (CET). The fiscal year in St. Kitts and Nevis coincides with the calendar year. 2 The simulation model assumes that the VAT is applied along the cigarette distribution chain from customs to wholesale and retail point of sale (except for goods entered under the hotel aids act).3 An ad valorem excise tax has been in effect since prior to 2014.

80


advancing action on the implementation of …documents1.worldbank.org/curated/en/...this report was...

Documents