curbing the epidemic governments and the economics of tobacco control the world bank presented by...
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Curbing the EpidemicGovernments and the Economics of Tobacco Control
The World BankPresented by Prabhat Jha, on behalf of the Report team and the Human Development Network
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Why did the World Bank produce this report?Economic arguments for, or against, tobacco control are unclear and often debated In 1957, British Chancellor of the Exchequer warned of the enormous contribution to the Exchequer from tobacco duties and the serious effect on the Commonwealth...that a campaign against smoking would haveIn 1996, an Asian Health Minister stated cigarette producers are making large contributions to our economy... we have to think about workers and tobacco farmers
Source: Pollock 1996, Tobacco Control 1996, The Economist 1997
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MethodologyConsultation workshops: Washington D.C. 1996, Beijing 1997, Cape Town 1998 Proceedings publishedBackground papers (17): Tobacco Control in Developing Countries, Oxford University Press Reviews of literatureNew Research
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Outline of ReportWhy intervene to control smoking?Which interventions are effective and which are not?What are the costs of tobacco control?Key recommendations
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Why should governments intervene?Large and growing number of deaths from smoking World: Annual Tobacco deaths (in millions)Source: Peto, Lopez, and others 1997; WDR 199320002030Developed 2 ~3Developing ~2 ~7World Total 4 ~101 in 2 of long-term smokers killed by their addiction1/2 of deaths in middle age (35-69)
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Smoking is more common among the less educated
Smoking prevalence among men in Chennai, India, by education levelsSource: Gajalakshmi and others, background paper
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Smoking accounts for much of the mortality gap between rich and poorRisk of death of a 35 year old male before age 70, by education levels in Poland 1996Source: Bobak and others, background paper; Jha and others 1999
Chart6
0.0480.00640.2099
0.08870.01310.2195
0.1860.04520.2846
Attributed to SMOKING
Attributed to SMOKING but would have died anyway at ages 35-69
Other causes
UK
4313 1996 M 26.91 6.81 6.03
4316 1996 M 43.35 18.64 15.68
4401 1996 M 20.56 3.88 3.52
4402 1996 M 31.48 11.17 9.84
4231 1996 M 26.43 5.44 4.80
4234 1996 M 50.09 22.34 18.13
4237 1996 M 32.13 10.18 8.87
4238 1996 M 51.58 23.12 18.60
2451 1996 M 36.93 14.98 12.97
2452 1996 M 35.87 13.59 11.75
2453 1996 M 19.71 4.30 3.94
2091 1991 M 19.98 5.57 5.13
2092 1991 M 22.22 6.66 6.09
2093 1991 M 24.74 8.23 7.46
2094 1991 M 27.43 10.27 9.26
2095 1991 M 35.12 14.71 12.89
UK
0.03520.00360.1668
0.06030.00780.201
0.09840.01330.2031
0.15680.02960.2471
Attributed to SMOKING
Attributed to SMOKING but would have died anyway at ages 35-69
Other causes
Sheet1
0.0480.00640.2099
0.08870.01310.2195
0.1860.04520.2846
Attributed to SMOKING
Attributed to SMOKING but would have died anyway at ages 35-69
Other causes
England
TOTAL RISKAttributed to SMOKINGAttributed to SMOKING but would have died anyway at ages 35-69Other causes
I/II21%4%4%0%17%
IIIN27%7%6%1%20%
IIIM/IV31%11%10%1%20%
V43%19%16%3%25%
Poland
Attributed to SMOKINGAttributed to SMOKING but would have died anyway at ages 35-69Other causes
Higher26%5%5%1%21%
Secondary32%10%9%1%22%
Primary52%23%19%5%28%
USA
Attributed to SMOKINGAttributed to SMOKING but would have died anyway at ages 35-69Other causes
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Why should governments intervene?Economic rationale or market failuresSmokers do not know their risksAddiction and youth onset of smoking Lack of information and unwillingness to act on informationRegret habit later, but many addictedCosts imposed on others Costs of environmental tobacco smoke and health costs
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Tobacco addiction starts early in lifeSource: Chinese Academy of Medicine 1997, Gupta 1996, US Surgeon General Reports, 1989 and 1994, Authors calculationsEvery day 80,000 to 100,000 youths become regular smokers
Chart2
25.3164556962132520
74.6835443038467766.2
92.41968665937094.878
China
India
US (born 1952-'61)
US (born1910-'14)
Age
Cumulative uptake in percent
China (males,1996)
India (males, 1995)
US (both sexes, born 1952-61)
US (both sexes, born 1910-14)
15-25
152025303540455055606570
206073777978777571676461
185466697170696764605855721
25769297100
age1520253035
China25759297100
India1346708590
US (born 1952-'61)257794.899100
US (born1910-'14)2066.278
15-25
China
India
US (born 1952-'61)
US (born1910-'14)
Age
Cumulative uptake in percent
China (males,1996)
India (males, 1995)
US (both sexes, born 1952-61)
US (both sexes, born 1910-14)
15-30
152025303540455055606570
206073777978777571676461
185466697170696764605855721
25769297100
1520253035
China25769297100
India1346708590
US36809399100
15-30
000
000
000
000
000
China
India
US
Age
Smokers (%)
Culmulative distribution of smoking initiation age in China, India and the US
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Health costs from smokingAnnual costs are about 6 to 15 percent of total health costs in high-income countriesDifferences in lifetime costs are smaller than annual costsShort-term cost escalationSmokers pay their way arguments are complex, and often misused Low pension coverage in low/middle income countries
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Government roles in interveningTo deter children from smokingTo protect non-smokers from others smokeTo provide adults the needed information to make an informed choiceFirst-best instrument, such as youth restrictions, are usually ineffective. Thus, tax increases are justified, and are effective.Tax increases are blunt instruments.
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Unless current smokers quit, smoking deaths will rise dramatically over the next 50 yearsSource: Peto and others, 1994; Peto, personal communication.
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Which interventions are effective?Measures to reduce demandHigher cigarette taxesNon-price measures: consumer information, research, cigarette advertising and promotion bans, warning labels and restrictions on public smokingIncreased access to nicotine replacement (NRT) and other cessation therapies
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Taxation is the most effective measure Higher taxes induce quitting and prevent startingA 10% price increase reduces demand by:4% in high-income countries8% in low or middle-income countriesYoung people and the poor are the most price responsive
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Cigarette price and consumption go in opposite trendsReal price of cigarettes and annual per adult cigarette consumption in South Africa 1970-1989 Source: Saloojee 1995
Real price
Consumption per adult
Cigarette consumption per adult (in packs)
Real Price
1.3
1.2
1.1
1
0.9
0.8
0.7
Year
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0.09
0.08
0.07
0.06
0.05
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What is the right level of tax? Complex question Depends on various factors, degree to which society wishes to protect children, revenue considerations, etc.Useful yardstick: where comprehensive programs used, tax is at least 2/3 to 4/5 of retail price.
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Cigarette tax levels are lower in low or middle-income countriesSource: Authors calculations
Chart2
3.05146771452.063535518867.6243602069
1.190.651
0.540.2546.4
0.330.1340.4
Average price in US$
Average tax in US$
Tax as a percentage of price
Countries by income
Average price or tax per pack (US$)
Tax as a percentage of price
Figure 7.1.b
GDP/capitaPrice/pack
CanadaCanadaCPIReal IncomeReal PriceConsumptiondaily consumptionall poppop 15+
198919901.74951605242.919520949.21001689733.0681.884.48644000995.8323720128
199020443.85718891013.2810020443.863.2880.784.42638619095.7543020481
199120770.03371625184.4610619665.764.2369.523.80950525154.9523568269
199219816.41053892515.3910718484.495.0360.263.30203122924.2926405979
199318914.48606228636.2610917324.185.7452.162.85831782323.7158131701
199418601.16330416052.9510917005.692.7077.264.23355155175.5036170172
199519238.43483483083.9811217215.053.5678.534.30308924795.5940160223
13944131088.23608692127.5902731197
canada
Consumption per capCig. PriceCPIofficial exchange ratereal price in canada $
19895.83237201282.91951.1843.063.624913433
19905.75430204813.281001.1673.283.8314736826
19914.95235682694.46105.6151961.1464.234.8443341207
19924.29264059795.39107.2055971.2095.036.0753445396
19933.71581317016.26109.1797031.295.747.3997332194
19945.50361701722.95109.3820041.3662.703.6821559973
19955.59401602233.98111.7536011.3723.564.8862948006
Figure 7.1.b
00
00
00
00
00
00
00
&A
Page &P
Real Income
Real Price
Real GDP/capita USD
Real Price/pack USD
Trends in real GDP/capita and price of cigarette/pack in Canada, 1989-1995
Table
00
00
00
00
00
00
00
&A
Page &P
Real Price
Consumption
Real price per pack (US$)
Annual cigarette consumption per capita (in packs)
Tax reduced in an attempt to counter smugglingIV
CigaretteTaxesTotalPrice80% of tax on80% tax onBasic Data on: GDP, GDP deflator, official exchange rate, PPP adjustment factor, and population.
Prices US $Per PackPopulationw/o taxw/o tax pricecurrent priceLast updated on:
1989-1997US $('000)CigarettesTaxesUS $0.80(incl. Tax)3/19/99 12:09
NameIncome1996New PriceNew PricePPP
Code0.80Country1996
HIAustralia4.853.15HIAustralia1805353493390501.391.445.33Albania
HIAustria2.962.16HIAustria810621481102031.482.504.77Argentina1.154
HIBahamas, The2.651.26HIBahamas, The2847102912.664.50Armenia0.012
HIBarbados2.501.03HIBarbados2648796591.505.98Australia0.752
HIBelgium3.322.49HIBelgium-Luxembourg1057242077215670.833.497.16Austria0.073
HICanada3.982.04HICanada296801547431299841.941.509.38Bahamas, The
HIDenmark5.214.38HIDenmark523723495171510.832.188.08Bangladesh0.094
HIFinland4.493.28HIFinland512614845111331.211.305.21Barbados
HIFrance2.902.17HIFrance583331972651420310.721.706.09Belgium0.028
HIGermany3.382.43HIGermany819221556061135930.950.923.42Belize0.757
HIGreece1.901.39HIGreece1049017719132890.510.763.04Bolivia0.669
HIIreland1.691.27HIIreland3554777656760.421.063.94Brazil1.392
HIItaly2.191.60HIItaly57226139338836030.591.754.38Bulgaria0.022
HIJapan2.431.46HIJapan12535196144576870.970.551.38Cambodia
HIKorea, Rep.0.770.46HIKorea, Rep.45314135439975160.311.515.38Canada0.839
HINetherlands2.992.15HINetherlands1557572996496370.842.708.44Chile0.006
HINew Zealand4.693.19HINew Zealand360225240196871.502.7712.61China0.603
HINorway7.015.47HINorway4348640751891.540.502.65Colombia0.003
HIPortugal1.471.19HIPortugal980821922159870.280.004.02Costa Rica0.012
HISingapore2.241.63HISingapore3384466733600.000.702.48Czech Republic0.076
HISpain1.380.99HISpain396741815151252460.392.558.24Denmark0.118
HISweden4.583.16HISweden881924669128281.422.425.04Dominican Republic0.199
HISwitzerland2.801.45HISwitzerland722463582381.341.521.58Egypt, Arab Rep.0.737
HITaiwan, China0.880.03HITaiwan, China21,38788871693190.851.657.48El Salvador0.178
HIUnited Kingdom4.163.24HIUnited Kingdom58368113220339660.912.443.49Estonia0.130
HIUnited States1.940.58HIUnited States26944478139546971.360.160.52Ethiopia0.773
79.3453.6590114516850131133589
3.052.0667.62187126
LIAlbania0.290.20LIArmenia36387173580.090.180.35Fiji1.173
LIArmenia0.200.10LIBangladesh1200731023230700.100.110.15Finland0.170
LIBangladesh0.090.03LICambodia10273483970.060.070.08France0.160
LICambodia0.050.01LIChina1232083122172492830.040.110.18French Guiana
LIChina0.100.04LIHonduras581636643660.061.021.13French Polynesia
LIHonduras0.630.06LIIndia9445803495902621920.570.170.67Gabon0.003
LIIndia0.370.28LIMoldova444413332490.090.440.54Gambia, The
LIMoldova0.300.06LINepal22021180513210.240.040.15Gaza Strip
LINepal0.080.06LIPakistan13997339734290060.020.140.51Georgia0.002
LIPakistan0.280.21LISri Lanka181001896345250.081.441.89Germany0.491
LISri Lanka1.050.25LIVietnam75181750327010.800.110.18Ghana0.003
LIVietnam0.100.04LIZambia8275537916140.060.821.17Greece0.004
LIZambia0.650.20LIZimbabwe11439488439070.460.150.77Grenada0.557
LIZimbabwe0.430.34LIAlbania3401510214280.091.942.70Guadeloupe
4.611.86
0.330.1340.42
LMIBelize1.500.42LMIBelize21970431.080.220.58Guam
LMIBolivia0.320.20LMIBolivia7593455618980.120.631.08Guatemala0.443
LMIBulgaria0.600.25LMIBulgaria84685122300.350.060.11Guinea0.003
LMIColombia0.060.03LMIColombia3644426969202260.030.331.33Guinea-Bissau0.000
LMICosta Rica0.740.56LMICosta Rica350021352860.190.951.10Guyana0.021
LMIDominican Republic0.610.08LMIDominican Republic7961398022690.530.390.90Haiti0.200
LMIEgypt, Arab Rep.0.500.29LMIEgypt, Arab Rep.6327142392180160.220.691.21Honduras0.277
LMIEl Salvador0.670.28LMIEl Salvador5796310.390.000.00Hong Kong0.128
LMIIndonesia0.000.00LMIIndonesia20045374766314020.000.390.67Hungary0.010
LMIJamaica0.370.16LMIJamaica2491398623910.221.152.88Iceland0.012
LMIPanama1.600.96LMIPanama2677669670.640.410.45India0.120
LMIParaguay0.250.03LMIParaguay495710986940.230.150.40Indonesia0.001
LMIPhilippines0.220.14LMIPhilippines6928241712258610.080.411.08Iran, Islamic Rep.0.001
LMIThailand0.600.37LMIThailand5870330105126440.230.540.92Iraq
LMITurkey0.510.22LMITurkey61797439721990.300.060.13Ireland1.557
LMIVenezuela0.070.04LMIVenezuela2231130790215530.040.752.48Israel
8.634.00
0.540.2546.40
UMIArgentina1.380.97UMIArgentina3521936958277190.410.471.89Italy0.001
UMIBrazil1.050.79UMIBrazil161087141757992300.260.481.58Jamaica0.045
UMIChile0.880.62UMIChile14421470640.260.590.59Japan0.006
UMICzech Republic0.330.00UMICzech Republic10251666346640.330.351.17Jordan3.057
UMIEstonia0.650.46UMIEstonia14717633240.200.540.93Kazakhstan0.038
UMIHungary0.520.22UMIHungary10049686622910.300.821.23Kenya0.060
UMIMalaysia0.680.23UMIMalaysia205811296678210.460.451.13Kiribati
UMIMexico0.630.38UMIMexico9271846359181730.250.550.90Korea, Dem. Rep.
UMIPoland0.500.20UMIPoland386012431861070020.306.3511.34Korea, Rep.0.002
UMISeychelles6.302.77UMISlovak Rep.5341309810683.530.681.04Kuwait
UMISlovak Republic0.580.20UMISlovenia1924207813090.380.721.94Kyrgyz Republic0.421
UMISlovenia1.080.68UMISouth Africa4239356095186530.401.592.38Lao PDR0.003
UMISouth Africa1.320.44UMISt. Lucia144130660.880.801.62Latvia3.282
UMISt. Lucia0.900.46UMIUruguay3204352421150.440.791.98Lebanon0.001
UMIUruguay1.100.66UMISeychelles7413256700.440.0032.22Lesotho0.907
189.06Liberia
1.190.6050.59Libya
Lithuania0.529
Average price in US$Average tax in US$Tax as a percentage of priceLuxembourg0.025
High Income3.052.0667.62Macao
Upper Middle Income1.190.6051.00Macedonia, FYR
Lower Middle Income0.540.2546.40Madagascar0.001
Low Income0.330.1340.40Malawi0.209
5.11Malaysia0.898
HI0.5969846402Maldives0.240
UMI0.2328098438Mali0.005
LMI0.1056448031Malta
LI0.064560713Marshall Islands
Martinique
Mauritania0.030
Mauritius0.134
Average Cigarette Price, Tax and % of Tax Share Per Pack in Income Regions, 1993, 1997Mayotte
Mexico0.292
Micronesia, Fed. Sts.
Moldova0.764
Mongolia0.009
Montserrat
Morocco0.289
Mozambique0.001
Myanmar
Namibia0.597
Nepal0.096
Netherlands0.481
Netherlands Antilles
New Caledonia
New Zealand0.682
Nicaragua0.562
Niger0.009
Nigeria0.051
Norway0.101
Oman
Pakistan0.099
Panama2.338
Papua New Guinea1.969
Paraguay0.001
Peru0.735
Philippines0.112
Poland0.641
Portugal0.008
Puerto Rico
Qatar
Reunion
Romania0.001
Russian Federation0.000
Rwanda0.010
Samoa
Sao Tome & Principe
Saudi Arabia
Senegal0.005
Seychelles
Sierra Leone0.003
Singapore0.612
Slovak Republic0.069
Slovenia0.010
Solomon Islands0.683
Somalia
South Africa0.528
Spain0.008
Sri Lanka0.055
St. Kitts and Nevis0.477
St. Lucia0.520
St. Vincent & the Gren.0.651
Sudan
Suriname0.005
Swaziland0.690
Sweden0.103
Switzerland0.484
Syrian Arab Republic0.072
Taiwan0.052
Tajikistan0.017
Tanzania
Thailand0.088
Togo0.010
Tonga
Trinidad and Tobago0.264
Tunisia2.313
Turkey0.000
Turkmenistan0.001
Turks & Caicos Isl.
Uganda0.003
Ukraine1.423
United Arab Emirates
United Kingdom1.594
United States1.013
Uruguay0.173
Uzbekistan0.107
Vanuatu0.021
Venezuela0.007
Viet Nam0.000
Virgin Isles (UK)
Virgin Isles (US)
West Bank
West Bank/Gaza
Yemen, Rep.0.022
Yugoslavia, Fed. Rep.
Zambia0.002
Zimbabwe0.342
Counts:144
000
000
000
000
&A
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Average price in US$
Average tax in US$
Tax as a percentage of price
Countries by income
Average price or tax per pack (US$)
Tax as a percentage of price
Data for GDP is in new zloty currency.
GDP figures are in Tajk rubles.
GDP figures are in manats.
GDP figures are in millions of sums.
-
Non-price measures to reduce demandIncrease consumer information: dissemination of research findings, warning labels, counter-advertisingComprehensive ban on advertising and promotionRestriction on smoking in public and work places
-
Comprehensive advertising bans reduce cigarette consumption Consumption trends in countries with such bans vs. those with no bans(n=102 countries) Source: Saffer, background paper
Chart1
17151635
14701530
Comprehensive ban
No ban
Year
Cigarette consumption per capita
No Ban
Ban
Sheet1
19811991
Comprehensive ban17151470
No ban16351530
Sheet1
00
00
Comprehensive ban
No ban
Year
Cigarette consumption per capita
Ban
No Ban
Sheet2
Sheet3
Sheet4
Sheet5
Sheet6
-
Potential impact of a price increase of 10% and a package of non-price measures Source: Ranson and others, background paper
Region
Change in number of smokers (millions)
Change in number of deaths (millions)
Price increases
Non-price measures
Price increases
Non-price measures
Low/Middle Income
-36
-19
-9
-4
High Income
-4
-4
-1
-1
World
-40
-23
-10
-5
-
NRT and cessation therapiesNRTs double the effectiveness of cessation efforts and reduce individuals withdrawal costsGovernments may widen access to NRT and other cessation therapies by:Reducing regulationConducting more studies on cost-effectiveness (especially in low/middle income countries)Considering NRT subsidies for poorest smokers
-
Which interventions are ineffective at reducing consumption?
Most measures to reduce supplyProhibitionYouth access restrictionsCrop substitutionTrade restrictions Control of smuggling is the only exception and it is the key supply-side measure
-
What are the costs of tobacco control?Revenue loss: likely to have revenue gainsa 10% tax increase would raise revenue by 7%Job loss: temporary, minimal and gradualPossible smuggling: crack down on criminal activity, not lower taxes Cost to individuals, especially the poor: partially offset by lower consumption
-
As tobacco tax rises, revenue rises tooReal price and tobacco revenues in the U.K., 1971-1995Source: Townsend 1998
_984564994.doc
Price (in 1994 pound sterling)
Taxation revenue (in miilion of pound sterling)
PRICE
TAX REVENUE
3.00
2.80
2.60
2.40
2.20
2.00
1.80
1.60
1.40
Year
1995
1992
1989
1986
1983
1980
1977
1974
1971
9000
8500
8000
7500
7000
6500
6000
1995
Real Prices and Tobacco Taxation Revenue UK 1971-
-
Studies on the employment effects of dramatically reduced or eliminated tobacco consumptionSource:Buck and others, 1995; Irvine and Sims, 1997; McNicoll and Boyle 1992, van der Merwe and others, background paper; Warner and others 1996
Type of country
Name and year
Net change as % of economy in base year given
Net Exporters
US (1993)
0%
UK (1990)
+0.5%
Zimbabwe (1980)
-12.4%
Balanced Tobacco Economies
South Africa (1995)
+0.4%
Scotland (1989)
+0.3%
Net Importers
Bangladesh (1994)
+18.7%
-
How cost-effective are tobacco control measures?US dollars per DALY savedNote: 3% discount rate, costs for non-price measures and all benefits projected over 30 yearsSource: Ranson and others, background paper
Region
Price increases of 10%
Non-price measures with effectiveness of 5%
NRT (publicly provided) with 25% coverage
Low / middle income
4 to 17
68 to 272
276 to 297
High Income
161 to 645
1,347 to 5,388
746 to 1,160
-
SummaryTobacco deaths worldwide are large and growing, and have higher burdens in the poorSpecific market failures support government interventionDemand measures, chiefly tax increases, information, and regulation are most effective to reduce consumptionControl of smuggling is the major supply-side interventionTobacco control is cost-effective
-
Key recommendationsGovernments: adopt multi-pronged strategy, tailored to each countrycigarette tax increases: 2/3 to 4/5 of retail priceconsumer information, research, advertising and promotion bans, warning labels and restrictions on public smoking widen access to NRT and other cessation therapies International agencies: review policies, sponsor research, address cross-border issues and support the FCTC
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