products Smokeless Tobacco Control Webinar Series WHO FCTC Global Knowledge Hub on Smokeless Tobacco July 11 2018 Rijo M John PhD Senior Fellow Centre for Public Policy Research rmjohngmailcom ID: 1040197
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1. Taxation and pricing of smokeless tobacco productsSmokeless Tobacco Control Webinar SeriesWHO FCTC Global Knowledge Hub on Smokeless TobaccoJuly 11, 2018Rijo M. John, PhDSenior FellowCentre for Public Policy Researchrmjohn@gmail.com
2. OutlinePrevalence of SLT use in the regionProduction and employment of SLTTaxation of SLTs in BangladeshTaxation of SLTs in IndiaAffordability of SLTsRecommendations
3. IntroductionSLT use causes a variety of cancers including oral cancers, oesophageal cancer, and pancreatic cancer in humansSLT use attributable deaths in India is about 350,000 every yearIn India, total economic costs attributable to SLT use from all diseases in the year 2011 for persons aged 35-69 was INR 234 billion. The excise tax revenue collected from SLT in that year amounted to only INR 12.6 billion91.3% of the SLT products sold worldwide are sold in traditional marketsHeterogeneous nature makes quantification and standardization difficult
4. Popular SLT products in India (GATS 2)Most commonly used tobacco product in India#1 Khaini - 104 million adults#3 Gutka - 51 million adults Among adult women: most commonly used tobacco products#1 betel quid with tobacco (20 million)#2 tobacco for oral applications (20 million)#3 Khaini (19 million)
5. Prevalence and number of SLT users by WHO region Source: WHO-NCI Monograph 21, 2017
6. Prevalence and number of SLT users by WB Country income groups Source: WHO-NCI Monograph 21, 2017
7. Prevalence of SLT users by genderSource: WHO-NCI Monograph 21, 2017The gender discrepancy in prevalence is relatively low for SLT
8. Changes in prevalence and number of SLT users in IndiaSLT users declined from 206 million to 199 million
9. Top 10 prevalence states in India
10. States with more than 20% relative reduction in prevalence in India
11. Changes in prevalence of SLT users in BangladeshSource: Nargis et al., PLOS ONE (2015)
12. Production of SLT91.3% of the SLT products sold worldwide are sold in traditional markets18.74% of tobacco produced in India is destined for making SLT productsGVA declined by about 23% during 2000 - 2011 for SLT industry in IndiaThe share of unregistered manufacturing in the total SLT manufacturing increased from 3% to 11% during the same time
13. Employment in SLT manufacturing in IndiaType of SLT Product2011-12% of all SLT ManufacturingSnuff3070.44Zarda7,22910.31Catechu (Katha) and chewing lime1,7952.56Pan masala and related products45,62365.04Chewing tobacco and other tobacco products15,19621.66Total employment in SLT manufacturing70,151(1.37% of total) Total employment in all tobacco manufacturing5,127,471100Source: National Sample Survey 2011-12 as given in Selvaraj et al, 2017
14. Price responsiveness of SLTsSystematic review of tobacco control policies on SLT use in USA Price elasticities of SLT products lie mostly in the inelastic range SLT taxes are an effective tool in reducing tobacco useIndia: Price elasticities of SLT: -0.1 to -0.9Bangladesh: Price elasticities of SLT: -0.39 to -0.64Cross-price elasticity of zarda w.r.t cigarettes is 0.35Different GATS surveys in India and ITC surveys in Bangladesh show significant reductions in the prevalence of SLT use in the general adult population Significant tax increases on SLT products also have occurred during the same period in both countries
15. Price and tax burden of SLT by country INCOME GROUPSSource: Estimated from WHO report on the global tobacco epidemic 2015 and 2017
16. Comparison of retail price and tax burden between SLT and cigarettesSource: WHO report on the global tobacco epidemic 2015 and 2017
17. Taxation of SLTs in BangladeshHistorically, no tax on SLTSLT brought under the tobacco control mechanism for the first time in 2008 with a 15% VAT on zarda and gul (oral powder)A 10% supplementary duty was introduced in 2009 and revised several times in later years. It currently stands at 100%Health Development Surcharge of 1% from FY 2014-15But the tax base was ex-factory price which is far less than retail prices and leads to low tax burdenFrom FY 2018-19 tax base shifted from ex-factory price to pre-determined tariff value (TV)National Board of Revenue collects tax from twenty SLT manufacturers only
18. SLT Taxes in Bangladesh for FY 2018-19
19. Taxation of SLTs in IndiaFollows a compounded levy scheme (or presumptive taxation) to apply excise taxes on SLT products. Manufacturer pays duty on the basis of a normative assessment of productionFY 2015-16: made maximum speed of packing machine as a factor for determining both the deemed production and excise duty payableGST Introduced from FY 2017-18Average Per 100g. of SLTINRProducer Price30National Calamity Contingent Duty (10%)3GST (28%) (applied on NCCD inclusive price)9.24Compensation cess (104%) (applied on NCCD inclusive price)34.32Price without profit margin76.56
20. Example of a compounded levy scheme in India (FY 2016-17)Retail Sale Price (per pouch)Excise Rate of duty per packing machine per month (Rs. in Lakhs)Chewing Tobacco (other than filter Khaini)KhainiUp to 300 pouches per minute301-450 pouches per minute451 pouches per minute or aboveAny SpeedWithout lime tubeWith lime tubeWithout lime tubeWith lime tubeWithout lime tubeWith lime tube Up to Rs. 1.0030.5128.9843.5841.492.6187.9818.52Exceeding Rs. 1.00 but not exceeding Rs. 1.5045.7643.4765.3762.1138.91131.9727.78Exceeding Rs. 1.50 but not exceeding Rs. 2.0054.9151.8678.4474.09166.69157.4335.19Exceeding Rs. 2.00 but not exceeding Rs. 3.0082.3777.79117.67111.13250.04236.1550.15Source: Central Board of Excise and Customs, Ministry of Finance, Govt. of India, 2017
21. Impact on excise tax collectionSource: Central Board of Excise and Customs, Ministry of Finance, Govt. of India, 2017
22. Tax rate on various smokeless products in India from 1 July 2017Tariff ItemSmokeless Tobacco ProductGSTCessNCCD2403 99 10Chewing tobacco (without lime tube)28%160%10%2403 99 10Chewing tobacco (with lime tube)28%142%10%2403 99 10Filter khaini28%160%10%2403 99 30Jarda scented tobacco28%160%10%2403 99 90Pan masala containing tobacco ‘Gutkha’28%204%10%2403 91 00“Homogenised” or “reconstituted” tobacco, bearing a brand name28%72%10%2403 99 20Preparations containing chewing tobacco28%72%10%2403 99 40Snuff28%72%10%2403 99 50Preparations containing snuff28%72%10%2403 99 60Tobacco extracts and essence bearing a brand name28%72%10%2403 99 60Tobacco extracts and essence not bearing a brand name28%65%10%2403 99 70Cut Tobacco28%20%-2403 99 90All goods, other than pan smasala containing tobacco 'gutkha', bearing a brand name28%96%10%2403 99 90All goods, other than pan masala containing tobacco 'gutkha', not bearing a brand name28%89%10%Source: Central Board of Excise and Customs, Ministry of Finance, Govt. of India, 2017
23. Affordability of SLT productsA major objective of taxing tobacco products is to make them less affordableRelative Income Price (RIP) - percentage of per capita income needed to purchase 100 packs of a given SLT or cigarette packCigarettes becoming less affordable in HICs and much more affordable in LICs & LMICsIndia: SLT products have become more affordable over the period 2001 to 2007 & 2006-2012Bangladesh: affordability of SLT products remained unchanged between 2011‐12 and 2014‐15growth in affordability of cigarettes relative to SLT may have induced switching from SLT use to cigarette smoking resulting in the higher prevalence of cigarette smoking and lower prevalence of SLT use
24. RecommendationsRevise taxes frequently (at least once a year) to keep the affordability lowTax should not make the SLT products cheaper than the alternative tobacco products available such as cigarettes Minimum price per pack of SLT should be at least as high as a pack of alternative smoked tobacco products available in the same marketThe incremental changes in SLT tax need to be much larger than that of cigarettes to bring about parity in taxation and retail priceSet a minimum floor price on all tobacco products; andTaxation of SLT products should be geared more towards a specific system instead of an ad valorem system as the former has better impact on reducing consumption
25. ReferencesMehrotra R, Sinha DN, Szilagyi T. Global smokeless tobacco control policies and their implementation, WHO FCTC Global Knowledge Hub on Smokeless Tobacco, ICMR-NICPR, Noida, India, 2017. https://goo.gl/Eh5CeF Smokeless Tobacco and Public Health: A Global Perspective. National Cancer Institute, U.S. Dept. of Health and Human Services, Centers for Disease Control and Prevention and NIH. 2014. U.S. National Cancer Institute and World Health Organization. The Economics of Tobacco and Tobacco Control. Bethesda, MD: U.S. Department of Health and Human Services, National Institutes of Health, National Cancer Institute; and Geneva, CH: World Health Organization 2016World Health Organization. WHO report on the global tobacco epidemic, 2015: raising taxes on tobacco. Geneva, Switzerland: 2015World Health Organization. WHO report on the global tobacco epidemic, 2017: Monitoring tobacco use and prevention policies. Geneva, Switzerland: 2017Shaktivel Selvaraj, Sarit Kumar Rout, B Ravi Kumar, et al. Economics of Smokeless Tobacco in India. In: Prakash C. Gupta, Monika Arora, Dhirendra Sinha, et al., eds. Smokeless Tobacco and Public Health in India. New Delhi, India: Ministry of Health and Family Welfare, Government of India 2017Nargis N, Hussain AKMG, Fong GT. Smokeless tobacco product prices and taxation in Bangladesh: findings from the International Tobacco Control Survey. Indian J Cancer 2014;51 Suppl 1:S33-38Rout SK, Arora M. Taxation of smokeless tobacco in India. Indian J Cancer. 2014;51(5):8.Nargis et al. “Trend in the Affordability of Tobacco Products in Bangladesh: Findings from the ITC Bangladesh Surveys.” Tobacco Control, May 28, 2018, tobaccocontrol-2017-054035.John, Rijo M, Yadav A, Sinha DN, “Smokeless Tobacco Taxation: Lessons from Southeast Asia”, Indian Journal of Medical Research, 2018 (Forthcoming)
26. Thank you!!!RMJOHN@GMAIL.COM