Resources For

Taxation: The Problem

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This section provides everything you need to effectively communicate all of the negative impacts of tobacco, showing how it’s deteriorating our economies and our health.

Core Messages

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The cheap price of cigarettes in Indonesia leads to an increase in children smoking. WHO noted in 2015 that there were more than 239,000 children under the age of 10 who had started smoking and about 4 million children between the ages of 10 and 14 became smokers each year. Don’t let this nation continue to be damaged by cigarettes.

Addiction is incompatible with freedom of choice. The industry works hard to addict young people before they are positioned to fully consider the risks, all the while imposing enormous costs on families, governments, and the economy. Governments have a responsibility to protect public health from becoming addicted to lethal products.

Illicit trade is not a phenomena that responds to tax/price increases, instead it primarily responds to the ability of crime activity to transpire without consequence.

Weak tobacco taxation ensures that tobacco product prices remain affordable.

Tobacco use costs the world more than 1.4 trillion USD in health care costs and lost productivity.

Affordable tobacco facilitates tobacco use.

Rising incomes and steady prices have increased the affordability of tobacco products in many countries.

When tobacco products are inexpensive, the poor disproportionately bear a higher share of the health and economic costs of tobacco use.

Smokers who want to quit have difficulty when cigarettes are affordable.

Affordable tobacco makes it easy for youth to experiment with tobacco use.

Affordable tobacco products undermine prosperous futures for families and countries because of the devastating health and economic costs of tobacco use.

Price increases may coincide precisely with tax increases, or may happen in the weeks/months before or after a tax increase. Prices can increase just once or they can increase gradually over time. Increasing the price before a tax increase goes into effect will reduce consumption and lower tax revenue prior to the tax increase. The temporary revenue loss will be reversed once the new tax goes into effect. However, the impact of the tax increase on consumption after the tax increase will be reduced since the demand has already responded to new prices before the new tax went into effect.

Under-shifting occurs when the tobacco industry increases prices by less than the amount of a tax increase; that is, it absorbs some of the tax increase. Under-shifting affects the public health efficacy of tax increases, since lower than expected prices result in higher than expected demand, particularly if the industry engages in targeted under-shifting for price-sensitive customers such as youth. On the other hand, the excise tax revenue generally will be higher than expected since the higher tax will be collected on larger than expected sales

Over-shifting occurs when the tobacco industry increase its prices by more than the tax increase. Tobacco companies may over-shift a tax increase on some products while simultaneously under-shifting a tax increase on other products. This will increase the segmentation of the market and reduce the overall impact on tobacco demand since those who would have otherwise quit may just switch to cheaper products (a phenomenon called down-trading).

Tobacco tax structures can be quite complex, and tax types and rates may vary based on different characteristics of tobacco products. When taxes are increased on some types of products more than others, the tobacco industry may exploit the different tax classifications and seek to have its products reclassified to categories with a lower tax rate. In such cases, the tobacco industry may change the physical attributes of its products or its production methods so that they fall into a lower tax category. For example, the industry may change the weight or length of a product so that it can be defined as a different type of product. The tobacco industry may also adjust its production processes so that its products fall within a lower tax production category.

Stockpiling (also referred to as forestalling and frontloading) occurs when tobacco companies over-supply their products to the market before a tax increase takes effect. In most jurisdictions, excise taxes are paid when products are released for sale from the factory or warehouse to the first link in the distribution channel, and not at the point of retail sale. In the case of imported products, customs duties are due at the time of import clearance. When a tax increase is scheduled to take place on a specific date, tobacco companies take advantage of this time gap between the release of products for distribution (and taxes paid) and the actual purchase of products by releasing larger than normal amounts of products from the factory (in order to pay the pre-tax increase tax rate. As result, the market is oversupplied with products taxed at the previous lower tax rate when the new, higher tax comes into effect. With this strategy, the industry may encourage its customers to stockpile cigarettes before a tax increase, driving up retail sales before the new tax goes into effect.

Strong action must be taken to protect women from the harms of tobacco use and exposure to secondhand smoke. Tobacco control policies, such as smoke-free environments, tobacco marketing bans, graphic warning labels, and increased tobacco taxes reduce tobacco use and will save the lives of women in Africa.

The Global Adult Tobacco Survey (GATS) is the global standard for systematically monitoring adult tobacco use (smoking and smokeless) and tracking key tobacco control indicators. GATS is a nationally representative survey, using a consistent and standard protocol across countries. It enhances Egypt’s capacity to design, implement, and evaluate tobacco control programs.

The Global Adult Tobacco Survey (GATS) is the global standard for systematically monitoring adult tobacco use (smoking and smokeless) and tracking key tobacco control indicators. GATS is a nationally representative survey, using a consistent and standard protocol across countries. It enhances Mexico’s capacity to design, implement, and evaluate tobacco control programs.

The Global Adult Tobacco Survey (GATS) is the global standard for systematically monitoring adult tobacco use (smoking and smokeless) and tracking key tobacco control indicators. GATS is a nationally representative survey, using a consistent and standard protocol across countries. It enhances Philippines’ capacity to design, implement, and evaluate tobacco control programs.

The Global Adult Tobacco Survey (GATS) is the global standard for systematically monitoring adult tobacco use (smoking and smokeless) and tracking key tobacco control indicators. GATS is a nationally representative survey, using a consistent and standard protocol across countries. It enhances Russian Federation’s capacity to design, implement, and evaluate tobacco control programs.

The Global Adult Tobacco Survey (GATS) is the global standard for systematically monitoring adult tobacco use (smoking and smokeless) and tracking key tobacco control indicators. GATS is a nationally representative survey, using a consistent and standard protocol across countries. It enhances Uruguay’s capacity to design, implement, and evaluate tobacco control programs.

The Global Adult Tobacco Survey (GATS) is the global standard for systematically monitoring adult tobacco use (smoking and smokeless) and tracking key tobacco control indicators. GATS is a nationally representative survey, using a consistent and standard protocol across countries. It enhances Brazil’s capacity to design, implement, and evaluate tobacco control programs.