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Health Taxes����Tamil Nadu�Dec 6, 2022�

Soonman KWON, Ph.D.

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Professor/Former Dean

School of Public Health, Seoul National University

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Tobacco Tax

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WHO: Tax rates should be at 75% or more of the price of the most popular brand of cigarettes

  • Reality: as of 2020, only 13% of the world’s population living in 40 countries were protected by tax rates at 75% or more

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10% price increase will reduce consumption by 5% in LMICs, and by about 4% in HICs

  • Half of the reduction from quitting, other half the result of existing users smoking less

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Source: WHO report on the global tobacco epidemic 2021: addressing new and emerging products, 27 July 2021

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Task Force on Fiscal Policy for Health

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  • 50% tobacco price increase worldwide could avert 27.2 million premature deaths over the next 50 years

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  • 50% tobacco price increase in 2017 would raise an additional USD 3 trillion (USD 2016 discounted) worldwide over the next 50 years

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Source: Task force on fiscal policy for health. Health taxes to save lives: employing effective excise taxes on tobacco, alcohol, and sugary beverages. New York, NY: Bloomberg Philanthropies; 2019

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Need significant and periodical tax increase (e.g., linked to inflation)

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Needs to be combined with other measures

  • e.g., Smoke-free environments, pack warnings, cessation programs, advertising bans

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Concerns on New and emerging products

  • e.g., electronic nicotine delivery system
  • Harms of nicotine? addictivity, flavored products
  • Effects on tobacco cessation?
  • Risk of re-normalizing of smoking behavior: e.g., May easier to initiate smoking for the younger
  • Uncertainty, Need preemptive policy?

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Some Controversy

  • Equity
  • Ear-marking
  • Price elasticity of demand, short-term vs. long-term

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Equity

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- Most evidence found tax burden and health benefits to favor low-income groups.

- Also depends on how tax revenue are used

e.g., used for NHI in Korea and the Philippines

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Ear-marking

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  • Usually supported by people in the health sector

- How ear-marked funds are used can affect public support for tax increase

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Long-term effect of ear-making on the funding in the health sector depends on contexts

- MoF may want to reduce the budget allocation to the health sector after the ear-marking

  • Political prioritization is needed

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e.g., Within two years after the Sin Tax Reform, the Philippines’ DoH budget increased from USD 1.25 billion to nearly USD 2 billion

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