The Global Evidence Frank J Chaloupka University of Illinois at Chicago Tobacco Taxation WinWin for Public Health amp Resource Mobilization World Bank Washington DC 18 April 2017 ID: 582959
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Are Tobacco Taxes Regressive?The Global Evidence
Frank J. Chaloupka, University of Illinois at ChicagoTobacco Taxation: Win-Win for Public Health & Resource MobilizationWorld Bank, Washington DC, 18 April 2017
1Slide2
www.tobacconomics.orgSlide3
Regressivity of Tobacco UseSlide4
Figure 16.1. Prevalence of Current Tobacco Use AmongAdults
Age 15 and Older, by Wealth Quintile, 2008–2010
Source: NCI & WHO 2016
www.tobacconomics.orgSlide5
Tobacco Use & Equity
Health consequences of tobacco
use
Generally
“regressive” with greater share of burden of tobacco caused disease falling on lower income populations
Greater use of
tobacco among lower SES groups
in
most
countriesLess access to health care to treat diseases caused by tobacco useSlide6
Source:
Jha et al, 2006Slide7
Poverty and Tobacco Use
Health and economic burdens
of poverty are compounded by tobacco use
Responsible
for impoverishment of
over 50 million
in
China and over 15 million in India
Crowding out of other spending:
Bangladesh: tobacco money spent equivalent to:
Males =
1402 calories of rice per day
Females
=
770
calories of rice per day
Sources:
Hu
, et al., 2008; John, et al., 2011;
Efroymson
, et al., 2001
www.tobacconomics.orgSlide8
Crowding Out17 ITC Countries
Source: ITC Project, 2012
Spending on tobacco
crowds out spending on essentials.
– Greater crowding
out in
LMICsSlide9
Tobacco & Poverty
Source: NCI & WHO 2016
www.tobacconomics.orgSlide10
Tobacco Use and Poverty
Chapter 16, Conclusion 2:Tobacco use in poor households exacerbates poverty by increasing health care costs, reducing incomes, and decreasing productivity, as well as diverting limited family resources from basic needs.
@
tobacconomicsSlide11
Effectiveness of Tobacco Taxes
Chapter 4, Conclusion 1:A substantial body of research, which has accumulated over many decades and from many countries, shows that
significantly increasing the excise tax and price of tobacco products is the single most consistently effective tool for reducing tobacco use
.
@
tobacconomicsSlide12
Tobacco Taxesand EquitySlide13
Impact of Tobacco Taxes on
the PoorJuly 23, 2010 – San Francisco Examiner“Democrats are relying more heavily in their midterm 2010 election message that Republicans care nothing about the poor. Conveniently absent from this analysis is Republican opposition to President Barack Obama’s cigarette tax increase……
While higher cigarette taxes do discourage smoking, they are highly regressive
. Analyzing a slightly less severe proposal in 2007, the Tax Foundation noted that
‘no other tax hurts the poor more than the cigarette tax
.’” Peyton R. Miller, special to the Examiner.
@
tobacconomicsSlide14
Tobacco Taxes & Equity
Tobacco taxes are clearly regressive in high income countriesGiven greater prevalence of smoking in lower income populations
Taxes are likely to be regressive
in most low/middle income countries
Depends on distribution of tobacco use by income level and tax structure
Less regressive in countries where differences in prevalence by income level are smaller; even less where prevalence/consumption rises with income
Less regressive in countries with
ad valorem
taxes and/or tiered taxes where tax as share of price increases with priceSlide15
Impact of Tobacco Tax Increases on the Poor
Tobacco taxes are regressive, but tax increases can be progressiveGreater price sensitivity of poor – relatively large reductions in tobacco use among lowest income populations, small reductions among higher income populations
Health benefits that result from tax increase are progressive
@
tobacconomicsSlide16
Source: Chaloupka
et al., in progress; assumes higher income smokers smoke more expensive brands
Who Pays& Who Benefits
Impact of Federal Tax Increase, U.S., 2009Slide17
Who Pays & Who BenefitsTurkey - 25% Tax Increase
Source: Adapted from Önder &
Yürekli
, 2014
@
tobacconomicsSlide18
People’s Republic of China
Distribution of marginal taxes and health benefits by SES
Lowest
SES group
:
Pays
6.4%
of increased taxes but receives
32.1%
of health benefits: hence, health/tax ratio:
5.02
Source: ADB
2013
www.tobacconomics.orgSlide19
Tobacco Taxes & Equity
Need to consider overall fiscal system Key issue with tobacco taxes is what’s done with the revenues generated by the tax
Greater public support for tobacco tax increases when revenues are used for tobacco control and/or other health programs
Net financial impact on
low-income
households can be positive when taxes are used to support programs targeting the poor
Concerns about
regressivity
offset by use of revenues for programs directed to poorSlide20
Philippines ‘Sin Tax’ Reform
Source: Paul, 2016
www.tobacconomics.orgSlide21
Philippines ‘Sin Tax’ Reform
Source: Paul, 2016
www.tobacconomics.orgSlide22
Summary Slide23
Tobacco use imposes disproportionate burden on the poor and contributes to
povertyBut tobacco taxes are regressive
Tobacco tax increases are progressive
From both a health and financial perspective
Earmarking new tobacco tax revenues for pro-poor programs
reduces concerns about impact of tax increases on the poor
Summary
@
tobacconomicsSlide24
For more information:
http://www.tobacconomics.org@tobacconomics
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