how tobacco taxes can expand fiscal space and benefit the poor
DESCRIPTION
Without intervention, cigarette smoking could kill about 267 million smokers in the People’s Republic of China, India, the Philippines, Thailand, and Viet Nam. Raising tobacco taxes in these countries can deter smoking, reduce the number of smoking-related deaths, and generate revenues to help meet healthcare costs for the poor.TRANSCRIPT
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May 2014 | Issue 56 Regional | Health
• Withoutintervention,cigarettesmokingwilleventuallykillabout267millioncurrentandfuturesmokersinthePeople’sRepublicofChina,India,thePhilippines,Thailand,andVietNam.
• InthesefiveAsiancountries,increasingtobaccotaxesisapro-poormeasurethatcanreducethenumberofsmokersandsmoking-relateddeaths,andgeneratesubstantialnewrevenues.
• Useofthesenewrevenuestofinancehealthservicesforthepoorcanincreaseimpactsonbothpovertyandhealth.
How Tobacco Taxes Can Expand Fiscal Space and Benefit the Poor
ASIA’S DOUBLE HEALTH BURDEN
Infectiousdiseaseshavegenerallyplaguedpoorercountrieswhilenoncommunicablediseaseshaveaffectedrichernations.1InAsia—wheretwo-thirdsoftheglobalpopulationresideandhalfoftheworld’spoorarefound—thisscenarioischanging.Moreandmorepeoplearesufferingfromnoncommunicablediseases,oftenasaresultofunhealthylifestyles.2
Noncommunicablediseasesprogressmoreslowly,comparedwithmanycommunicablediseaseswhichtendtoaffectpeoplequickly.Thiscreatescomplexhealthneedsthatareexpensivetotreatandcanoverwhelmalreadystressedhealthcaresystems.Theproblemispredictedtobecomemoreacutewiththeagingofpopulations.
Whileitsnoncommunicablediseasesareontherise,Asiastillfacesanunfinishedagendaofcommunicablediseases—fromwater-borneillnessestomalaria.Withurbanpopulationslikelytoincreaseby20%–25%by2050,overcrowdinginbigcitiescouldalsoinflatetheriskofinfectiousdiseasetransmission.Increasedproductionofanimalsforfoodalsohasinherentrisksasmanyinfectiousdiseases,suchasinfluenza,arepassedfromanimalstohumans.
Hence,Asia’sdevelopingeconomiesandhealthauthoritiesconfrontagrowing,doubleburdenofever-presentandre-emerginginfectiousdiseases—withpossibleunexpectedoutbreaksofnewones—aswellasanexplosionofnoncommunicablediseases.3Publichealthexpertsadvocatethatthewarneedstobewagedontwofronts:publiceducationandpoliciesthatencouragehealthyeatingandhealthierlifestyles.Raisingtobaccotaxes,forone,isawin–winmeasure.
THE SCOURGE OF SMOKING
A Global Health Hazard.Smokingisaglobalhealthhazardandahugechallenge.AccordingtotheWorldHealthOrganization,anestimated5–6milliondeathswerecausedbytobaccousein2010.Mortalityisprojectedtonearlydoubleby2030.4About1billionpeoplewillbekilledfromsmokingthiscenturyunless
smokingcessationsignificantlyincreasesamongadults.Cessationsubstantiallyreducestherisksofsmoking.Thosewhoquitbeforetheageof40canachievedeathratesclosetononsmokers.5
Aggressive Tobacco Marketing.Whilecessationhasbecomeverycommoninhigh-incomecountries(e.g.,therearemoreex-smokersthancurrentsmokersintheUnitedKingdom),itisnotwidespreadinAsiancountries.Outoftheworld’s1.2billionsmokers,two-thirdsliveinjust15countries,6ofwhich—thePeople’sRepublicofChina(PRC),India,Indonesia,thePhilippines,Thailand,andVietNam—areinAsia.6Thisispartlyduetotheaggressivemarketingdonebytobaccocompanies.7Theindustryactivelymarketscigarettesand
___________________1Themainnoncommunicablediseasesarecardiovasculardiseases,diabetes,mentalillness,chronicrespiratorydiseases,andcancer.Theseareusuallycausedbyunbalanceddiets,physicalinactivity,alcoholordrugabuse,stress,inadequatesleep,andtobaccouse.Themaininfectiousdiseases—causedbybacteria,fungi,parasites,andviruses—arelowerrespiratoryinfections,HIV/AIDS,diarrhealdiseases,tuberculosis,andmalaria.2Diabetes,obesity,andexcessweightfromenergy-dense,big-portion,andfast-foodmealshavebecomeworrisomeinAsia.SeetheInternationalDiabetesFoundation’s2014IDF Diabetes Atlas atwww.idf.org/diabetesatlas3H5N1(avianinfluenza),anewregionalpandemic,struckasrecentlyas2009.4Mostmortalityamongsmokersisduetoneoplastic,vascular,respiratory,andotherdiseasesthatcanbecausedbysmoking.WorldHealthOrganization.2011.MPOWER:A Policy Package to Reverse the Tobacco Epidemic. Geneva.5PrabhatJha.2009.AvoidanceofWorldwideCancerMortalityandTotalMortalityfromSmoking.Nature Reviews:Cancer.Vol.9;pp.655–664.
6Overall,80%oftheworld’ssmokersarefromdevelopingcountries,withacommensurateratioofdeathsoccurringthere.7TheFederalTradeCommissionsayscigarettesarestillamongthemostheavilyadvertisedandpromotedproductsintheworld,withspendingreaching$8.6billionannuallyintheUnitedStatesalone.TheSoutheastAsiaTobaccoControlAlliancenotesthatsomegovernmentsindevelopingnationsevenrelyonfinancefromtobaccocompanies—under"corporatesocialresponsibility"programs—tocovercostsofpublicservices,includingschools.SeeSoutheastAsiaTobaccoControlAlliance.2014.Tobacco Industry Interference Index.Available:www.seatca.org/dmdocuments/SEATCA-TII%20Index%20Report.pdf
Increasingcigarettetaxescansignificantlyreducethenumberofcurrentandfuturesmokers.
PhotobyADB Photo Library
Without intervention, cigarette smoking will eventually
HighlightsKnowledge Showcases
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©AsianDevelopmentBank PublicationStockNo.ARM146554-2
KNOWLEDGE CONTRIBUTORS
TheKnowledgeShowcasesSeries,aproductoftheKnowledgeSharingandServicesCenter,highlightsgoodpracticesandinnovativeideasfromADBtechnicalassistanceandotheroperationstopromotefurtherdiscussionandresearch.
www.adb.org/knowledgeshowcaseswww.adbknowledgeshowcases.org
TheAsianDevelopmentBank(ADB)isdedicatedtoreducingpovertyintheAsiaandPacificregion.
Theviewsexpressedinthispublicationarethoseoftheauthor(s)anddonotnecessarilyreflecttheviewsandpoliciesofADBoritsBoardofGovernorsorthegovernmentstheyrepresent.
Patricia Moser([email protected])isaleadhealthspecialistinADB’sRegionalandSustainableDevelopmentDepartment.
fightspublichealthpolicies(throughtrade,judicial,andlegislativeactions)topreventbansoncigaretteadvertising,taxincreases,andothereffectiveanti-tobaccomeasures.
Tackling the Scourge through Policies.However,allsixcountriesarepopulous,growingeconomies,wherecigarettesmokingisontherise.Afailuretoholddownthescourgeofsmokingwillhavemajorpublichealth—andhealthfinancing—implicationsforbothcurrentandfuturegenerations.Fortuitously,tacklingtheproblemoftobaccodoesnotdependonscientistsfindinganelusivevaccine:legislationthatmakescigarettespriciercandirectlyreducetobaccouse,especiallyamongpoorandyoungpeople.Policiessuchasbansonsmokinginpublicplaceshelptoo,andareneededasafullresponsetosustainreducedtobaccouse.8
TOBACCO TAXES: A WIN–WIN MEASURE FOR FISCAL SPACE AND HEALTH
In2012,theAsianDevelopmentBank(ADB)investigatedhowtobaccotaxesmightreduceconsumptionandsavelivesinfiveoftheAsianhigh-burdencountries.ThestudyfoundthatforthePRC,India,thePhilippines,Thailand,andVietNam,increasesincigaretteprices(intherangeof25%–100%)wouldeffectivelyreducethenumberofsmokersandthenumberofsmoking-relateddeaths.Additionally,theincreaseswouldgeneratesubstantialnewrevenues,atimelywindfallsinceportionsofthepopulationsofthesecountriesreceivefreeornearlyfreehealthcare,thecostsofwhichmustbemet.
Table: Percentage of Population with Free or Nearly Free Health Care—Selected Countries
Source:ADB.2011.BurdenofHealthCosts.InWho Will Pay for Asia’s Double Burden? Innovative Financing is Needed to Address an Unprecedented Burden of Communicable and Noncommunicable Diseases.Manila.www.adb.org/publications/who-will-pay-asias-double-burden-innovative-financing-needed-address-unprecedented-burd
Reduced Cigarette Consumption. Inthefivecountriescovered,increasingcigarettepricesby50%,whichcorrespondstoataxincreaseofabout70%–122%,wouldreducethenumberofcurrentandfuturesmokersbynearly67millionandreducetobaccodeathsby27million.9
Increased Revenues. A50%increaseincigarettepriceswillalso
generate$24billioninadditionalrevenueannually.Thiswouldmeana143%–178%increaseovereachcountry’scurrentcigarettetaxrevenue.Therevenueincrease,or“fiscalspace,”wouldaverage0.30%ofgrossdomesticproduct,withawiderangeof0.07%–2.52%.
A Pro-poor Measure. Thepoorestsocioeconomicgroupsineachcountrywillcarryonlyasmallpartoftheextrataxburden.Inreturn,theywillreapasubstantialproportionofthehealthbenefitsofreducedsmoking.Theratioofhealthbenefitsaccruedtothepoortotheextrataxesbornebythepoorwouldrangefrom1.4to9.5.
Clearly,largeincreasesinthetobaccotaxinallfivecountriesareunusuallyattractiveforpublichealthandpublicfinance,andarepro-poorintheirhealthbenefits.
Related Links• ADB.2011.Who Will Pay for Asia’s Double Burden? Innovative Finaning is Need-
ed to Address an Unprecedented Burden of Communicable and Noncommunicable Diseases.Manila.Available:www.adb.org/publications/who-will-pay-asias-double-burden-innovative-financing-needed-address-unprecedented-burd
• ADB.2012.Tobacco Taxes:A Win–Win Measure for Fiscal Space and Health.Ma-nila.Available:www.adb.org/publications/tobacco-taxes-win-win-measure-fiscal-space-and-health
• ADB.2014.AsianDevelopmentOutlook.www.adb.org/publications/series/asian-development-outlook
Olivier Serrat ([email protected])isaprincipalknowledgemanagementspecialistinADB’sRegionalandSustainableDevelopmentDepartment.
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8Otherpoliciesincludecomprehensivebansontobaccoadvertisingandpromotion;betterpublicinformation,forexamplebymeansofmassmediacounteradvertisingandprominentlabelsoncigarettepacksaboutthehealthrisksoftobaccouseandthebenefitsofquitting;andhelpforsmokerswhowanttostopsmoking.9Thestudyreckonedthatintheabsenceofintervention,smokingwouldeventuallykillabout267millioncurrentandfuturecigarettesmokerswhoarealivetodayinthefivecountries.
ImageusedfortheWorldNoTobaccoDay,31May.Source:WorldHealthOrganizationwww.who.int/campaigns/no-tobacco-day/2014/poster/en/
China, The People' s Republic of 50± 70India 30± 40Indonesia 30± 40Philippines 30± 40Thailand >70Viet Nam 20± 30