46
Tobacco Control in Developing Countries Tobacco Control in Developing Countries The World Bank World Health Organization

Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Embed Size (px)

Citation preview

Page 1: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Tobacco Control in Developing CountriesTobacco Control in Developing Countries

The World Bank World Health Organization

Page 2: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Curbing the EpidemicGovernments and the Economics of Tobacco Control

Curbing the EpidemicGovernments and the Economics of Tobacco Control

The World BankThe World Bank

Page 3: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Why this book?Why this book?Economic arguments around tobacco control are unclearEconomic arguments around tobacco control are unclear

and often debatedand often debated

nn In 1996In 1996, an Asian Health Minister stated “cigarette, an Asian Health Minister stated “cigaretteproducers are making large contributions to our economy...producers are making large contributions to our economy...we have to think about workers and tobacco farmers”we have to think about workers and tobacco farmers”

nn In 1997, In 1997, The EconomistThe Economist commented "most smokers (two- commented "most smokers (two-thirds or more) do not die of smoking-related disease. Theythirds or more) do not die of smoking-related disease. Theygamble and win. Moreover, the years lost to smoking comegamble and win. Moreover, the years lost to smoking comefrom the end of life, when people are most likely to die offrom the end of life, when people are most likely to die ofsomething else anyway”something else anyway”

Source: Tobacco Control 1996, The Economist 1997

Page 4: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

MethodologyMethodologynn Consultation workshopsConsultation workshops: : Washington D.C.Washington D.C.

1996, Beijing 1997, Cape Town 19981996, Beijing 1997, Cape Town 1998uu Cape Town Proceedings published in 1998Cape Town Proceedings published in 1998

nn 19 Background papers19 Background papersuu 40 economists, epidemiologists, and control experts40 economists, epidemiologists, and control experts

from 13 countries.from 13 countries.uu Reviews of literatureReviews of literatureuu New analysesNew analysesuu 2 rounds of peer review2 rounds of peer review

nn Synthesized in World Bank ReportSynthesized in World Bank Report“Curbing the Epidemic“Curbing the Epidemic””

Page 5: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Outline of BookOutline of Book

nn Tobacco use and its consequencesTobacco use and its consequencesnn Analytics of tobacco useAnalytics of tobacco usenn Demand for tobaccoDemand for tobacconn Supply of tobaccoSupply of tobacconn Policy directionsPolicy directions

Page 6: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Per capita cigarette consumptionhas increased in developing

countries

Per capita cigarette consumptionhas increased in developing

countries

0

500

1000

1500

2000

2500

3000

3500

1970-72 1980-82 1990-92

Year

Ann

ual p

er a

dult

ciga

rett

e co

nsum

ptio

n

Developed

Developing

World

Source: WHO 1997

Page 7: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Large and growing number of deathsfrom smoking

Large and growing number of deathsfrom smoking

Source: Peto and Lopez, 2000

Past and future tobacco deaths (in millions)

Time Millions of deaths1901-2000 100 (mostly in developed

countries)

2001-2100 1,000 (mostly in developingcountries)

u 500 M among people alive todayu1 in 2 of long-term smokers killed by their addictionu1/2 of deaths in middle age (35-69)

Page 8: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Trends in Smoking in Norwegian Males by Income Group

Trends in Smoking in Norwegian Males by Income Group

25%

35%

45%

55%

65%

75%

85%

1955 1960 1965 1970 1975 1980 1985 1990Year

Mal

e sm

oki

ng

pre

vale

nce High income

Low income

Source: Lund et al., 1995

Page 9: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Smoking is more common among the less educated

Smoking prevalence among men inChennai, India, by education levels

Smoking is more common among the less educated

Smoking prevalence among men inChennai, India, by education levels

Source: Gajalakshmi and Peto 1997

6 4 %5 8 %

4 2 %

2 1 %

0 %

2 0 %

4 0 %

6 0 %

I l l i te ra te < 6 y e a r s 6 - 1 2y e a r s

> 1 2y e a r s

L e n g t h o f s c h o o l i n g

Sm

okin

g pr

eval

ence

Page 10: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Smoking accounts for much of the mortality gapbetween rich and poor

Risk of death of a 35 year old male before age 70,by education levels in Poland, 1996

Smoking accounts for much of the mortality gapbetween rich and poor

Risk of death of a 35 year old male before age 70,by education levels in Poland, 1996

Source: Bobak et al., 2000

5% 9%19%1%

1%

5%

21%22%

28%

0%

10%

20%

30%

40%

50%

60%

Higher Secondary Primary

Other causes

Attributed to SMOKINGbut would have diedanyway at ages 35-69

Attributed to SMOKING

Page 11: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Why should governments intervene?Economic rationale or “market failures”

Why should governments intervene?Economic rationale or “market failures”

nn Smokers do not know their risksSmokers do not know their risksnn Addiction and youth onset of smokingAddiction and youth onset of smoking

uu Lack of information and unwillingness toLack of information and unwillingness toact on informationact on information

uu Regret habit later, but many addictedRegret habit later, but many addicted

nn Costs imposed on othersCosts imposed on othersuu Costs of environmental tobacco smokeCosts of environmental tobacco smoke

and health costsand health costs

Source: Jha et al., 2000

Page 12: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Tobacco addiction starts early in lifeTobacco addiction starts early in life

Source: Chinese Academy of Preventive Medicine 1997, Gupta 1996, US SurgeonGeneral Reports, 1989

nn Every day 80,000 to 100,000 youthsEvery day 80,000 to 100,000 youthsbecome regular smokersbecome regular smokers

C h i n a

(males,1996)

I n d i a

(males, 1995)

U S

(both sexes,

born 1952-61)

U S

(both sexes,

born 1910-14)

0

20

40

60

80

100

15 20 25

Age

Cu

mu

lati

ve u

pta

ke in

per

cen

t

Page 13: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Underestimated risks of smokingUnderestimated risks of smoking

uu 7 in 10 of Chinese smokers thought smoking does7 in 10 of Chinese smokers thought smoking doesthem “little or no harm”them “little or no harm”

uu Risks notRisks not internalized internalized: personal risks perceived: personal risks perceivedlower than average riskslower than average risks

uu Risks of addiction downplayed: only 2 in 5 of USRisks of addiction downplayed: only 2 in 5 of USadolescents intending to quit actually doadolescents intending to quit actually douu in high-income countries, 7 in 10 smokers wish they in high-income countries, 7 in 10 smokers wish they

had not startedhad not started

Source: Kenkel and Chen, 2000; Weinstein, 1998; SGR, 1989 and 1994

Page 14: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Smoking versus other risks(alcohol, fast driving)

Smoking versus other risks(alcohol, fast driving)

uu Risk of addiction is greater for smokingRisk of addiction is greater for smokinguu No “learning” from youthful excessesNo “learning” from youthful excessesuu Risk of death from smoking is much higher: ofRisk of death from smoking is much higher: of

1000 males smokers aged 151000 males smokers aged 15uu 125 die from smoking in middle-age125 die from smoking in middle-ageuu 20 die from road accidents or violence (30 from all20 die from road accidents or violence (30 from all

alcohol-related conditions)alcohol-related conditions)

Source: Jha et al., 2000

Page 15: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Healthcare costs from smokingHealthcare costs from smoking

nn Annual (gross) healthcare costs:Annual (gross) healthcare costs:uu 0.1-1.1% of GDP, or 0.1-1.1% of GDP, or 6 -15% of total health costs 6 -15% of total health costs in high-in high-

income countriesincome countriesuu proportionally similar in lower-income countriesproportionally similar in lower-income countries

nn Net (lifetime) healthcare costs:Net (lifetime) healthcare costs:uu Differences in lifetime costs are smaller than annualDifferences in lifetime costs are smaller than annual

costscostsuu Best studies do suggest there are net lifetime costsBest studies do suggest there are net lifetime costsuu Pension or “smokers pay their way” arguments are Pension or “smokers pay their way” arguments are

complexcomplexSource: Lightwood et al., 2000

Page 16: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Government roles in interveningGovernment roles in intervening

nn To deter children from smokingTo deter children from smokingnn To protect non-smokers from others’ smokeTo protect non-smokers from others’ smokenn To provide adults with necessary information toTo provide adults with necessary information to

make an informed choicemake an informed choice

uu First-best instrument, such as youth restrictions, areFirst-best instrument, such as youth restrictions, areusually ineffective. Thus, tax increases are justified,usually ineffective. Thus, tax increases are justified,and are effective.and are effective.

uu Tax increases are blunt instruments.Tax increases are blunt instruments.Source: Jha et al., 2000

Page 17: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Adam Smith on tobacco taxAdam Smith on tobacco tax

"Sugar, rum, and tobacco, arecommodities which are no wherenecessaries of life, which are becomeobjects of almost universal consumption,and which are therefore extremely propersubjects of taxation”

Source: An Inquiry into the Nature and Causes of TheWealth of Nations, Book V, Chapter III, pages 474-476,1776;

Page 18: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Unless current smokers quit, smoking deathswill rise dramatically over the next 50 years

Unless current smokers quit, smoking deathswill rise dramatically over the next 50 years

0

340

520

70

500

220

190

0

100

200

300

400

500

1950 2000 2025 2050

Year

Toba

cco

deat

hs (m

illio

n)

Baseline

If proportion ofyoung adultstaking up smokinghalves by 2020

If adultconsumptionhalves by 2020

Source: Peto and Lopez, 2000

Page 19: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Which interventions are effective?Measures to reduce demand

Which interventions are effective?Measures to reduce demand

nn Higher cigarette taxesHigher cigarette taxesnn Non-price measuresNon-price measures: consumer: consumer

information, research, cigarette advertisinginformation, research, cigarette advertisingand promotion bans, warning labels andand promotion bans, warning labels andrestrictions on public smokingrestrictions on public smoking

nn Increased access to nicotine replacementIncreased access to nicotine replacement(NRT) and other cessation therapies(NRT) and other cessation therapies

Page 20: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Taxation is the most effective measureTaxation is the most effective measure

nn Higher taxes induce quitting, reduceHigher taxes induce quitting, reduceconsumption and prevent startingconsumption and prevent starting

nn A 10% price increase reduces demand by:A 10% price increase reduces demand by:uu 4% in high-income countries4% in high-income countriesuu 8% in low or middle-income countries8% in low or middle-income countries

nn Young people and the poor are the mostYoung people and the poor are the mostprice responsiveprice responsive

Source: Chaloupka et al., 2000

Page 21: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Cigarette price and consumption showopposite trends (1)

Real price of cigarettes and annual per adult cigarette consumption inSouth Africa 1970-1989

Cigarette price and consumption showopposite trends (1)

Real price of cigarettes and annual per adult cigarette consumption inSouth Africa 1970-1989

Source: Saloojee 1995

0.05

0.06

0.07

0.08

0.09

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988

Year

Cig

aret

te c

on

sum

ptio

n p

er a

du

lt (in

pac

ks)

0.7

0.8

0.9

1

1.1

1.2

1.3

Rea

l Pri

ce

Real price

Consumptionper adult

Page 22: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Cigarette price and consumption showopposite trends (2)

Real price of cigarettes and cigarette consumption in the UK, 1971-96

Cigarette price and consumption showopposite trends (2)

Real price of cigarettes and cigarette consumption in the UK, 1971-96

Source: Townsend 1998

9000

10000

11000

12000

13000

14000

15000

16000

17000

1971 1974 1977 1980 1983 1986 1989 1992 1995

Year

£ 1.25

£ 1.45

£ 1.65

£ 1.85

£ 2.05

£ 2.25

£ 2.45

£ 2.65

Pric

e (£

) 199

4 va

lue

PRICE

CONSUMPTION

Page 23: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

What is the “right” level of tax?What is the “right” level of tax?

nn Complex questionComplex questionuu Depends on various factors, such as degree toDepends on various factors, such as degree to

which society wishes to protect children,which society wishes to protect children,revenue considerations, etc.revenue considerations, etc.

nn Useful yardstick: where comprehensiveUseful yardstick: where comprehensiveprograms used, tax is at least 2/3 to 4/5 ofprograms used, tax is at least 2/3 to 4/5 ofretail price.retail price.

Source: Chaloupka et al., 2000

Page 24: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

There is still ample room, especially in lower-income countries, to raise cigarette taxes

There is still ample room, especially in lower-income countries, to raise cigarette taxes

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

High Income Upper MiddleIncome

Lower MiddleIncome

Low Income

Countries by income

Aver

age

pric

e or

tax

per p

ack

(US$

)

0

10

20

30

40

50

60

70

80

Tax

as a

per

cent

age

of p

rice

Average price in US$Average tax in US$Tax as a percentage of price

Source: Chaloupka et al., 2000

Page 25: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Non-price measures to reduce demandNon-price measures to reduce demand

nn Increase consumer informationIncrease consumer information::dissemination of research findings, warningdissemination of research findings, warninglabels, counter-advertisinglabels, counter-advertising

nn Comprehensive ban on advertising andComprehensive ban on advertising andpromotionpromotion

nn Restrictions on smoking in public and workRestrictions on smoking in public and workplacesplaces

nn Increase access to nicotine-replacementIncrease access to nicotine-replacementtherapies (NRT)therapies (NRT)

Page 26: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Health information reduces thedemand for cigarettes

Health information reduces thedemand for cigarettes

Country Time Event Immediate reduction incigarette consumption

The US 1964 Surgeon GeneralReport

1-2%

UK 1962 1st report of the RoyalCollege of Physicians

5%

Switzerland 1966 An anti-smokingcampaign

11%

Turkey 1982 Implementation ofhealth warning labels

8%

Source: Kenkel and Chen, 2000

Page 27: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Comprehensive advertising bans reduce cigarette consumption Consumption trends in countries with such bans vs. those with no bans

(n=102 countries)

Comprehensive advertising bans reduce cigarette consumption Consumption trends in countries with such bans vs. those with no bans

(n=102 countries)

No Ban

Ban

1450

1500

1550

1600

1650

1700

1750

1981 1991

Year

Cig

aret

te c

onsu

mpt

ion

per

capi

ta

Source: Saffer, 2000

Page 28: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Effect of advertising bans andcounter-advertising

Effect of advertising bans andcounter-advertising

nn A comprehensive set of tobaccoA comprehensive set of tobaccoadvertising bans can reduce consumptionadvertising bans can reduce consumptionby 6.3%by 6.3%

nn Counter-advertising messages (set at 15%Counter-advertising messages (set at 15%of the total number of advertisingof the total number of advertisingmessages) can reduce smoking by aboutmessages) can reduce smoking by about2% a year2% a year

Source: Saffer, 2000

Page 29: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Clean indoor-air laws andyouth access restrictionsClean indoor-air laws andyouth access restrictions

nn Clean indoor-air laws:Clean indoor-air laws:uu can reduce cigarette consumptioncan reduce cigarette consumptionuu can be self-enforcingcan be self-enforcinguu work best with social consensus againstwork best with social consensus against

smokingsmokingnn Youth access restrictions:Youth access restrictions:uu mixed evidence of effectivenessmixed evidence of effectivenessuu require aggressive reinforcementrequire aggressive reinforcement

Page 30: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

NRT and cessation therapiesNRT and cessation therapies

nn NRTs double the effectiveness of cessationNRTs double the effectiveness of cessationefforts and reduce individuals’ withdrawal costsefforts and reduce individuals’ withdrawal costs

nn Governments may widen access to NRT andGovernments may widen access to NRT andother cessation therapies by:other cessation therapies by:

uu Reducing regulationReducing regulationuu Conducting more studies on cost-effectivenessConducting more studies on cost-effectiveness

(especially in low/middle income countries)(especially in low/middle income countries)uu Considering NRT subsidies for poorest smokersConsidering NRT subsidies for poorest smokers

Source: Novotny et al., 2000

Page 31: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Potential impact of a price increase of10% and a package of non-price measures

Potential impact of a price increase of10% and a package of non-price measures

Region Change in numberof smokers(millions)

Change in number ofdeaths (millions)

Priceincreases

Non-pricemeasures

Priceincreases

Non-pricemeasures

Low/MiddleIncome

-38 -19 -9 -4

HighIncome

-4 -4 -1 -1

World -42 -23 -10 -5

Source: Ranson et al., 2000

Page 32: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Which interventions are ineffective atreducing consumption?

Most measures to reduce supply

Which interventions are ineffective atreducing consumption?

Most measures to reduce supply

nn ProhibitionProhibitionnn Youth access restrictionsYouth access restrictionsnn Crop substitutionCrop substitutionnn Trade restrictionsTrade restrictionsnn Control of smuggling is the only exceptionControl of smuggling is the only exception

and it is the key supply-side measureand it is the key supply-side measureSource: Jacobs et al., 2000; Woolery et al., 2000; Taylor et al., 2000

Page 33: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Trade and tobacco consumptionTrade and tobacco consumption

nn Trade liberalisation increases cigaretteTrade liberalisation increases cigaretteconsumption, especially in low and middle-consumption, especially in low and middle-income countriesincome countries

nn Trade restrictions are unrealisticTrade restrictions are unrealisticnn Governments should apply other effectiveGovernments should apply other effective

control measures without discriminationcontrol measures without discriminationagainst domestic or imported cigarettes.against domestic or imported cigarettes.

Source: Taylor et al., 2000

Page 34: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

What are the costs of tobacco control?What are the costs of tobacco control?

nn Revenue lossRevenue loss: : likely to have revenue gainslikely to have revenue gainsuu a 10% tax increase would raise revenue by 7%a 10% tax increase would raise revenue by 7%

nn Job lossJob loss: : temporary, minimal, and gradualtemporary, minimal, and gradual

nn Possible smugglingPossible smuggling: : crack down on criminalcrack down on criminalactivity, not lower taxesactivity, not lower taxes

nn Cost to individuals, especially the poor:Cost to individuals, especially the poor:partially offset by lower consumptionpartially offset by lower consumption

Page 35: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Cigarette tax increases result inhigher tax revenues (1)

Real cigarette tax rate and real cigarette tax revenue inthe US 1960-95

Cigarette tax increases result inhigher tax revenues (1)

Real cigarette tax rate and real cigarette tax revenue inthe US 1960-95

0

0.1

0.2

0.3

0.4

0.5

0.6

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

Year

Rea

l cig

aret

te t

ax r

ate

per

pac

k (a

veag

e fo

r al

l sta

tes)

0

10

20

30

40

50

60

70

80

Rea

l cig

aret

te t

ax r

even

ue

in m

illio

ns

of

US

$

real cigarette tax ratereal cigarette tax revenue

Source: Sunley et al., 2000

Page 36: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Cigarette tax increases result inhigher tax revenues (2)

Real cigarette tax rate and real cigarette tax revenue inSouth Africa 1960-97

Cigarette tax increases result inhigher tax revenues (2)

Real cigarette tax rate and real cigarette tax revenue inSouth Africa 1960-97

0

0.001

0.002

0.003

0.004

0.005

0.006

0.007

0.008

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

Year

Rea

l ciga

rette tax

rates

per pa

ck in con

stant 19

90 Zim

babw

e

dollars

0

100000

200000

300000

400000

500000

600000

700000

Rea

l ciga

rette tax

rates

per pa

ck in con

stant 19

90 Zim

babw

e

dollars

Real tax per pack

Real tax revenue

Source: Sunley et al., 2000

Page 37: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Studies on the employment effects of dramaticallyreduced or eliminated tobacco consumption

Studies on the employment effects of dramaticallyreduced or eliminated tobacco consumption

Type of country Name and year Net change as % ofeconomy in base

year givenNet Exporters US (1993) 0%

UK (1990) +0.5%

Zimbabwe (1980) -12.4%

Balanced TobaccoEconomies

South Africa (1995) +0.4%

Scotland (1989) +0.3%

Net Importers Bangladesh (1994) +18.7%

Source:Buck and others, 1995; Irvine and Sims, 1997; McNicoll and Boyle 1992, van der Merwe and others, background paper; Warner and others 1996

Page 38: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Smuggling of CigarettesSmuggling of Cigarettes

nn Industry has economic incentive to smuggleIndustry has economic incentive to smuggleuu Increase market share and decrease tax ratesIncrease market share and decrease tax rates

nn Best estimate: 6 to 8.5% of total consumptionBest estimate: 6 to 8.5% of total consumptionnn Non-price variables importantNon-price variables important

uu Perceived level of corruption more important than cigarettePerceived level of corruption more important than cigarettepricesprices

nn Tax increase will lead to revenue increase, even in theTax increase will lead to revenue increase, even in theevent of increased smugglingevent of increased smuggling

Source: Merrriman et al. 2000; Joosens, 2000; BAT,1998

Page 39: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Tobacco smuggling tends to rise in line with thedegree of corruption

Smuggling as a function of transparency index

Tobacco smuggling tends to rise in line with thedegree of corruption

Smuggling as a function of transparency index

Brazil

Pakistan

Cambodia

Indonesia

Sweden

Austria

y = - 0.02x + 0.2174R2 = 0.2723

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0 2 4 6 8 10

Transparency index for country

Sm

uggl

ing

as a

sha

re o

f con

sum

ptio

n (%

)

Source: Merriman et al., 2000

Page 40: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Control of SmugglingControl of Smugglingnn Countries need not make a choice between higherCountries need not make a choice between higher

cigarette tax revenues and lower cigarettecigarette tax revenues and lower cigaretteconsumptionconsumptionuu Higher tax rates can achieve bothHigher tax rates can achieve both

nn Effective control measures of smuggling existEffective control measures of smuggling existuu Focus on large container smugglingFocus on large container smugglinguu Prominent local language warnings and tax stampsProminent local language warnings and tax stampsuu Increase penaltiesIncrease penaltiesuu Licensing and tracking of containersLicensing and tracking of containersuu Increase export duties or bondsIncrease export duties or bonds

nn Multilateral tax increases help combat smugglingMultilateral tax increases help combat smuggling

Source: Merrriman Source: Merrriman et al.et al. 2000;Joosens, 2000; BAT, 1998 2000;Joosens, 2000; BAT, 1998

Page 41: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Lower tax rates in Canada inresponse to smuggling

Real price of cigarettes and annual cigaretteconsumption per capita, Canada, 1989-1995

Lower tax rates in Canada inresponse to smuggling

Real price of cigarettes and annual cigaretteconsumption per capita, Canada, 1989-1995

Tax reduced in an a t t e m p t t o c o u n t e r

smugglingI

V

0

1

2

3

4

5

6

719

89

1990

1991

1992

1993

1994

1995

Rea

l pri

ce p

er p

ack

(US

D)

0

10

20

30

40

50

60

70

80

90

Ann

ual c

igar

ette

con

sum

ptio

n pe

r ca

pita

(in

pac

ks)

Real Price Consumption

Source: World Bank, 1999

Page 42: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Smuggling and Tax Revenue (1)Smuggling and Tax Revenue (1)SOUTH AFRICA, 1990sSOUTH AFRICA, 1990snn Increased excise tax from 38 to 50% of retail priceIncreased excise tax from 38 to 50% of retail price

uu Smuggling rose from 0 to 6%Smuggling rose from 0 to 6%uu Sales fell 20%Sales fell 20%uu Revenue went up 2 foldRevenue went up 2 fold

CANADA, 1993-94CANADA, 1993-94nn Lowered tax in response to organized smugglingLowered tax in response to organized smuggling

uu Retail price fell by halfRetail price fell by halfuu Total consumption rose 48%, more so in youngTotal consumption rose 48%, more so in younguu Average revenue per capita fell by 35%Average revenue per capita fell by 35%

Source: Abedian, 1998; Sweanor, 1998Source: Abedian, 1998; Sweanor, 1998

Page 43: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Smuggling and Tax Revenue (2)Smuggling and Tax Revenue (2)Percent of revenue increases from a 10% taxPercent of revenue increases from a 10% tax

increase, taking smuggling into accountincrease, taking smuggling into account

CountryCountry Unilateral Unilateral MultilateralMultilateral

BulgariaBulgaria +9.7+9.7 +9.8+9.8TurkeyTurkey +9.6+9.6 +9.6+9.6FranceFrance +5.8+5.8 +7.0+7.0UKUK +4.6+4.6 +5.9+5.917 Countries17 Countries +6.9+6.9 +8.2+8.2

Source: * Econometric estimates from Merriman Source: * Econometric estimates from Merriman et al.et al., 2000, 2000

Page 44: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

How cost-effective are tobacco controlmeasures?

US dollars per healthy year life gained

How cost-effective are tobacco controlmeasures?

US dollars per healthy year life gained

Note: 3% discount rate, costs for non-price measures and all benefits projected over 30 years

Source: Ranson et al., 2000

Region Priceincreases of

10%

Non-pricemeasures

witheffectiveness

of 5%

NRT (publiclyprovided) with

25%coverage

Low / middleincome

4 to 34 68 to 272 276 to 297

High Income 165 to 1,370 1,347 to5,388

746 to 1,160

Page 45: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

SummarySummarynn Tobacco deaths worldwide are large and growing,Tobacco deaths worldwide are large and growing,

and have higher burdens among the poorand have higher burdens among the poor

nn Specific market failures support governmentSpecific market failures support governmentinterventionintervention

nn Demand measures, chiefly tax increases,Demand measures, chiefly tax increases,information, and regulation are most effective toinformation, and regulation are most effective toreduce consumptionreduce consumption

nn Control of smuggling is the major supply-sideControl of smuggling is the major supply-sideinterventionintervention

nn Tobacco control is cost-effectiveTobacco control is cost-effective

Page 46: Tobacco Control in Developing Countries - …fjc.people.uic.edu/Presentations/Slides/tobaccontrol2000.pdfTobacco Control in Developing CountriesTobacco Control in Developing Countries

Key recommendationsKey recommendationsnn GovernmentsGovernments:: adopt multi-pronged strategy,adopt multi-pronged strategy,

tailored to each countrytailored to each countryuu cigarette tax increases: 2/3 to 4/5 of retail pricecigarette tax increases: 2/3 to 4/5 of retail priceuu consumer information, research, advertising andconsumer information, research, advertising and

promotion bans, warning labels and restrictions onpromotion bans, warning labels and restrictions onpublic smokingpublic smoking

uu widen access to NRT and other cessation therapieswiden access to NRT and other cessation therapies

nn International agenciesInternational agencies:: review policies,review policies,sponsor research, address cross-border issuessponsor research, address cross-border issuesand support the FCTCand support the FCTC