Substantial Increases in Tobacco Taxes RecommendedAugust 8, 2000
Research Summary
The World Health Organization (WHO) has proposed hefty increases in taxes on tobacco products as a means of saving millions of lives, especially in developing countries, the Associated Press reported Aug. 8."There is an expression that death and taxes are unavoidable. We argue that this is the one tax that can help you avoid death," said Prabhat Jha, co-author of the Tobacco Control in Developing Countries study.
After conducting a three-year research project, Jha concluded that a 10 percent increase in tobacco taxes worldwide would persuade about 42 million people to give up smoking. About 10 million deaths from smoking-related illnesses would be prevented -- 9 million in developing countries.
"There is absolutely clear evidence that higher prices reduce consumption, especially among youth," Jha said. "In Canada in the late 1980s and early 1990s, when they significantly increased prices, consumption fell by 50-60 percent."
According to WHO estimates, smoking kills more than 4 million people per year. If left unchecked, the death rate from smoking could rise to 10 million per year by 2030.
The study also addressed the argument that jobs would be loss as a result of a tobacco tax increase. While Jha acknowledged potential job losses in sub-Saharan Africa, he said the occurrence is unlikely. "As people don't spend money on cigarettes, they will spend money on other goods. They will buy popcorn, they go to the movies. These generate alternative jobs and also alternative revenues," said Jha.
Jha said he also recognized that higher tobacco taxes could lead to more smuggling. He pointed out, however, that the extra money governments receive can be used to control contraband goods.
"When taxes go up you expect the incentives for contraband to also go up, but once we control other factors, such as the lack of enforcement, that explains much more of the difference than price," said Jha. "The bottom line for governments is they can raise prices if they have good smuggling measures."
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