New Delhi , June 13, 2014 – Key findings from the PHFI’s report “An Empirical Study of India’s Fiscal Policies against Tobacco: A State Level Analysis” released
10% INCREASE IN CIGARETTE PRICES WILL LEAD TO ALMOST 3% DECREASE IN CONSUMPTION AND 7% INCREASE IN GOVERNMENT REVENUES: STUDY
A 10% INCREASE IN BIDI PRICES WILL LEAD TO ALMOST 5% DECREASE IN CONSUMPTION AND 4% INCREASE IN GOVERNMENT REVENUES: STUDY
The Public Health Foundation of India (PHFI) organised a consultation on National and State Fiscal Policies for Tobacco Control. Key findings from a PHFI study on “An Empirical Study of India’s Fiscal Policies against Tobacco: A State Level Analysis” were released. The objective of the study, given the complexity of tax structure for different tobacco products was to understand the tax policy measures and their implications on tobacco consumption in the country. The study was funded by International Development Research Centre (IDRC).
Speaking on the findings of the study, Dr. Sakthivel Selvaraj Senior Public Health Specialist, Economics & Financing, PHFI said, “The current tax rates of tobacco products are not only low but the tax structure of tobacco products are complex and tax governance poor. As a result, tobacco taxes and therefore prices have not deterred tobacco consumption. Bidi, which is largely consumed at the population level, is least taxed. Significant potential exists in India to hike taxes rates in India to reduce tobacco consumption and mop up revenue to the government which is presently fiscally-challenged.”
- To highlight the need for a health-focused fiscal policy for tobacco;
- To examine the current tax structure on all tobacco products (smoking and smokeless) and their contribution to revenue generation;
- To examine the changing shares of household expenditure on different tobacco products over the years;
- To provide likely scenarios of revenue generation from an increase in tax on tobacco products and its distributional effects across populations in Indian states [1] ; and,
- To disseminate evidence generated from this exercise for stronger and more effective and health focused fiscal policies at all levels of government in India.
Key Findings
- A 10% increase in cigarette prices will lead to almost 3% decrease in consumption and 7% increase in government revenues
- A 10% increase in bidi prices will lead to almost 5% decrease in consumption and 4% increase in government revenues
- Cigarette excise can be increased by 370% of present levels, leading to a 54% decline in consumption and 115% increase in revenue
- Bidi excise can be increased by 100% of present levels, leading to a 40% decline in consumption and 22% increase in revenue
- In the states of West Bengal, Rajasthan, Uttar Pradesh and Maharashtra, price elasticity for bidi is extremely high with a 10% increase in taxes resulting in a 6-10% decline in consumption
- In India, so far, taxes have not been used effectively to reduce tobacco consumption at the population level.
Dr. Monika Arora, Director Health Promotion PHFI said, “According to the Global Burden of Disease Study 2010, tobacco use is the second largest risk factor for death today. The enormous burden of tobacco use in India is well documented with nearly one million Indians dying each year. With India adopting a national target of 30% relative reduction of tobacco use by 2025, it is paramount that India’s response to mitigate the tobacco problem is strengthened. The WHO recommended MPOWER strategies must be implemented strategically, with international best buys like raising tobacco taxes being adopted in national fiscal policies.”
The study used data from the Global Adult Tobacco Survey (GATS) India, 2009-10 to study tobacco consumption patterns. Household consumption expenditure data on tobacco were obtained from the National Sample Survey Organization (NSSO) Consumer Expenditure Surveys (CES) from 1999-00 to 2011-12. A theoretical model developed by Deaton (1989, 1997) was followed to estimate the own and cross price elasticity of tobacco products. [2] , [3] .
India faces the challenge of double burden of communicable and non-communicable diseases, leading to enormous loss to both society and economy. This is exacerbated by the high tobacco use. More than one-third of Indian adults (34.6 percent, an estimated 275 million persons) consume tobacco products. [4] Among the economic measures outlined in the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC), tobacco taxation is the most cost effective intervention to reduce tobacco consumption. The FCTC stipulates that all tobacco products be taxed at a tax incidence of 75%.
The World Health Organisation (WHO) theme for this years’ World No Tobacco Day is ‘Raise Tobacco Taxes’. The Union Minister for Health and Family Welfare, Dr. Harsh Vardhan supported for raising taxes on tobacco products during an event organized by PHFI in collaboration with Ministry of Health and Family Welfare and WHO to commemorate World No Tobacco Day 2014 last week. BWI
