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Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements (English)

Tobacco taxes are recognized as an effective policy tool to reduce tobacco consumption and improve health outcomes; however, policy makers often hesitate to use them because of their possible regressive effects. This report assesses the ability of taxes on tobacco to improve future health and welfare outcomes, with a focus on their distributional impact and effects on the poor. In addition to adverse consequences on health and quality of life of smokers and their family members, tobacco-related illnesses cost billions of dollars in medical expenditures and losses in human capital and productivity, imposing heavy economic tolls on households and governments. Developing countries bear a high and increasing share of the economic burden of tobacco. However, traditional analyses often overlook the many economic benefits of reducing tobacco consumption. This report presents empirical findings using an extended cost benefit analysis (ECBA) methodology, to incorporate a more comprehensive view of the costs and benefits of increasing prices of tobacco on household welfare, and to assess their distributional impact by accounting for different consumer behaviors across income groups. Evidence for several countries shows that large price shocks on cigarettes can generate progressive and welfare-improving medium and long-term net impacts, that particularly improve welfare of lower-income households. Large shares of societies—and particularly the poor—can benefit from positive income gains by reducing tobacco-related medical expenses and avoiding premature deaths. Moreover, additional fiscal revenues generated may be used to further enhance measures to control tobacco and promote equity. Ultimately, the benefits and distributional impact of raising taxes on tobacco will depend on the ability of policy to understand and to leverage consumers' responses toward quitting tobacco, and to target comprehensive interventions to help the most vulnerable groups.


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    Fuchs Tarlovsky,Alan, Marquez,Patricio V., Dutta,Sheila, Gonzalez Icaza,Maria Fernanda

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    The World Region,

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    Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements

  • Keywords

    tobacco tax; domestic resource mobilization; financing development; Health Nutrition and Population; price of tobacco products; effective tobacco control policy; leading cause of death; public health; excise tax; Tobacco Taxation; excise tax revenue; tobacco tax revenue; reducing tobacco consumption; total tax burden; Poverty and Equity; consumption of tobacco; health care expenditure; tobacco control interventions; tobacco tax increases; country case study; health care system; coronary heart disease; public health gains; consumption of cigarettes; price of cigarette; increase tax revenue; fiscal reform program; cost benefit analysis; public health challenge; share of woman; public health impact; human capital development; health insurance premium; tobacco control effort; tobacco control measures; health care cost; deaths from tobacco; education for all; risk of death; healthy life expectancy; average retail price; increase consumer price; risk of tuberculosis; tobacco tax rates; positive health outcomes; tobacco production; channels of transmission; tobacco control action; comprehensive tobacco control; public health perspective; total tax revenue; domestic cigarette production; risk for disease; smoking prevalence; secondhand smoke; supply chain; price shock; cigarette tax; empirical findings; excise duty; ad valorem; premature death; average price; tobacco company; illicit trade; tobacco prices; lung cancer; smoking rates; cigarette price; ill health; additional revenue; government revenue; cigarette sale; excise revenue; medical bill; tax structure; young population; young adult; behavioral response; health systems; increasing share; chewing tobacco; welfare outcome; blood pressure; policy tool; comprehensive view; household welfare; productivity loss; tobacco industry; lost productivity; budgetary allocation; fiscal revenue; banning advertising; prevention strategies; public policy; preterm delivery; measure of support; annual deaths; adverse outcomes; mental disorder; vulnerable people; fetal health; acute toxicity; promotional activity; raw tobacco; regulatory pressure; future smokers; tobacco epidemic; resource base; social media; public program; regulatory response; regulatory jurisdiction; epidemiological transition; health health; smoke exposure; chronic lung; rural area; Health cost; high share; Medical care; global population; cigarette smoke; selling price; weighted average; tax system; national health; exchange rate; Exchange Rates; tobacco sales; prices increase; children's health; statistical information; social acceptability; high tax; government use; smaller share; tobacco growers; tax stamps; Tax Evasion; excise stamps; tax authorities; tax authority; distribution network; Tax Reform; total employment; primary cause; tobacco market; regulatory control; tax enforcement; effective prevention; health objectives; inflation rate; national tax; positive impact; sectoral teams; cigarette consumption; tax level; tobacco addiction; universal health; government resource; tax base; real income; young people; increasing consumption; cigarette smoker; local budget; vat rate; alcohol tax; sale price; subsequent years; international examples; healthcare costs; Learning and Innovation Credit; health benefit; fiscal space; tobacco account; international partners; health budget; measure of use; addictive substance; low-income people; Cardiovascular Disease; tobacco disease; tobacco smoke; scientific evidence; active smoking; chronic bronchitis; long-term benefits; pulmonary disease; brain development; regressive impact; dominant cause; health burden; lower-income household; lost income; longer life; empirical application; worker increase; health effect; equity implication; cost-benefit analysis; empirical study; accounting implications; poor household; price rise; congenital malformations; smokeless tobacco; potential danger; cleft lip; cigarette smoking; medical cost; empirical result; fetal development; global action



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Fuchs Tarlovsky,Alan Marquez,Patricio V. Dutta,Sheila Gonzalez Icaza,Maria Fernanda

Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements (English). WBG Global Tobacco Control Program Washington, D.C. : World Bank Group.