Financial Accountant
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Tax Increases on Tobacco

Jan 25th 2018
Financial Accountant
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It is clear that the tobacco tax increases are designed to serve as a way to make tobacco products less affordable over time. A large number of countries throughout the world have seen an excise tax on tobacco over the recent years. Studies have been conducted to determine the impact this has had on the overall prices and changes in buying practices. 

Tobacco Control in Different Countries

The fact that excise taxes have been put in place for tobacco products is said to be a majorly effective control measure for buyer's actions. In fact, today it is considered the most effective measure when it comes to making tobacco purchases. Peer-reviewed studies conducted in recent years have shown that the tax increase has led people to use less tobacco, quit using it, or never begin using tobacco products in the first place. 

Socioeconomic Differences

Tobacco companies state that these increases are especially difficult for the poor. However, this is a claim that appears not to be true. The initial cost may prove a burden, but overall the benefits are greater in terms of health. Just looking at cost, the change in usage of tobacco products produces greater benefits for financially disadvantaged individuals since they tend to experience fewer hospitalizations and medical issues from a decrease in tobacco use. 

The financial hardship becomes greater with the addition of the taxes, so individuals who continue to use the products will have a larger burden. 

Public Health Initiatives Will See an Increase 

Another benefit to tax increases on tobacco products is that these revenues can become reinvested towards building onto and creating new public health programs. It is a big step towards alleviating health inequities between different socioeconomic classes. This is especially the case when the health programs are geared towards assisting the poorest members of the society. You can see this clearly if you look at how the Philippines implemented tobacco excise taxes in 2013, and the resulting benefits to the poor. 

WHO FCTC Recommendations for Price Increases

It is stated in the WHO FCTC, in Article 6, that parties should raise the price of tobacco products in stores. Price increases should be higher than the inflation and income growth rates as a means to discourage the purchase of these products. Over time, advantages should be seen all around in terms of public health and socioeconomic issues. 

Changes such as adding on tobacco excise taxes should be implemented as a part of a larger and more comprehensive tobacco control program. When done properly, it ensures that the market is run more smoothly, and people will see greater benefits across the board in the areas of finances and health. 

Tax policies need to ensure that tracing and tracking is put into place to keep illicit tobacco trade from occurring. Also, there should be mandatory tax stamps. Those agencies that are in charge of public health should work towards creating the policies instead of leaving it entirely up to finance and revenue agencies. 

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