Washington, DC, 03 October 2023 - The Pan American Health Organization (PAHO), in collaboration with the Adolfo Ibáñez University (UAI) from Chile/Tabaconomía, brought together a group of experts on economics and health from governments of Brazil, Chile and Colombia; and from Bloomberg Philanthropies, World Bank, Organization for Economic Co-operation and Development (OECD), and University of Illinois-Chicago (UIC) to foster a space for sharing evidence and strengthening the position of stakeholders to further tobacco taxes in the Region of the Americas.
The webinar, held on September 14, included the participation of Guillermo Paraje from UAI; Ceren Ozer, Chris Lane, and Alan Fuchs from the World Bank; and Rosa Sandoval, PAHO´s regional advisor on tobacco control. They were followed by an international panel, that discussed tax reforms and shared country experiences from Brazil, Chile, and Colombia, and global experiences from outside the Region. Closing remarks were shared by Johanna Birckmayer, who coordinates of the tobacco economics projects supported by Bloomberg Philanthropies.
Smoking has been found to significantly increase the risk of COVID-19 severity and death, and tobacco consumption is the only common risk factor amongst the main noncommunicable diseases (NCDs) worldwide, which correspond to 71% of total global deaths each year. In the Region of the Americas, this figure rises to 81% of all annual deaths. This forms the impetus for action on tobacco control.
Tobacco taxes have been identified by the WHO as a "best buy" for tackling NCDs, meaning they are amongst the most cost-effective and feasible interventions to prevent NCDs. They present a strategic opportunity to reduce burdens on health systems and provide fiscal space for countries, particularly in the context of the COVID-19 pandemic.
But, with the least progress of any of the tobacco control measures tracked by the WHO report on the global tobacco epidemic, tobacco taxes are lagging. In the latest round of data collection, tobacco products have been found to have become more affordable on average, whilst tobacco tax levels remained relatively stagnant.
Comparing the last two WHO reports on the global tobacco epidemic, Rosa Sandoval states, “There is room to do more. Of the four most cost-effective measures to curb the tobacco epidemic, the use of taxation remains among the least implemented interventions”. There are still very few countries that have reached the benchmark established by the WHO that recommends a 75% tax share of the retail price, “we have not yet managed to go beyond 4 countries in the Region that comply with this measure” she points out.
In the current environment post-COVID-19 as a global emergency, economies are still recovering, and many countries in the Region of the Americas face high inflationary realities. “The value of specific health taxes, including tobacco, have been eroded by inflation, and there has been a reduction in real revenue”, said Chris Lane, senior consultant on health taxes at The World Bank. Continuing to increase tobacco taxes and structure them to outpace inflation and income is essential.
To qualify tobacco taxes as regressive is an argument that the tobacco industry has consistently used, stated Alan Fuchs, senior economist at the World Bank. “People with lower income tend to spend a greater part of their budget on basic goods such as food, but also sugary drinks and alcohol. As our results demonstrate and what evidence has repeatedly shown... when taxes increase the price of tobacco, this causes behavioral changes that lead to a reduction in consumption, and that reduction is greater in lower-income groups. If we add to this that the reduction in consumption also leads to benefits such as the decrease in the incidence of diseases caused by smoking, the expenses of treating them, and the expansion of life expectancy, among others, entails a higher benefit for lower-income individuals”.
This event included an interesting panel of discussion that included the interventions of representatives from OECD and UIC, along with delegates representing the Ministries of Health from Brazil and Chile, as well as a congresswoman of the House of Representatives from Colombia.
Jeffrey Drope, a researcher professor from UIC, emphasized that the “evidence on the impact of tobacco taxes on lower-income households is solid. Tobacco use is bad for poverty and taxes ultimately help address it. There is experience in places with high inflation that have raised taxes on tobacco, which is a brave and accurate decision, acting in the appropriate and recommended manner. In almost all circumstances, tobacco taxes impose a tax burden on low-income sectors for the short term but then decrease over time. The people we should be concerned about are those who do not reduce their consumption and set aside income to help them do so, for example.”
Additionally, Mariona Masmontserrat, tax advisor for OECD, insisted on the importance that tax policy is coherent with market changes and takes into account that high price inflationary contexts can be used by the tobacco industry to their benefit. “The specific component of tobacco taxes should be updated based on inflation, it is the only way to guarantee that the tax share does not decrease over time and be sure that revenue remains constant over time in real terms”.
Over the past two years, several countries of the Region have been signaling increased political interest towards progressive tax reforms, including tobacco taxes. “We are emerging from this very serious crisis that is not yet over. Health taxes can and should be a part of this recovery. It is a policy tool that we have that can address both crises by reducing tobacco use and the burden of NCDs in our communities and health systems”, said Johanna Birckmayer.
The evidence overwhelmingly points towards tobacco taxes being an important policy tool to reduce tobacco consumption and improve population health. In the context of recovering global economies and inflationary environments post the global health emergency of COVID-19, now, more than ever, working towards protecting gains and advancing progress in tobacco taxation in the Region, is critical. “At Bloomberg Initiative we are deeply impressed by the tobacco control policies that have happened in the Region and we really see Latin America and the Caribbean as a leader in many ways”, finalized Johanna Birckmayer.
