Myths and Facts
The tobacco industry and its front groups frequently spread false information against raising tobacco taxes to perpetuate misconceptions. Being informed about these misconceptions and knowing how to respond is critical.
Myth: Tobacco tax increases will result in lost revenue. If demand for cigarettes falls when prices are increased, then revenues must fall as well.
Fact: When cigarette taxes are increased, declines in demand do not exceed gains in revenue. Several studies and various country case studies, such as those from the Philippines and South Africa, have proven that raising taxes will lead to increased government revenues. Given that demand for tobacco is relatively inelastic, the uptick in revenue more than compensates for any appreciable decrease in demand. This drop would also be offset by increased human productivity and savings from health care costs. Even if it is illicit trade does occur, any revenue losses from illicit trade are dwarfed by tax revenues collected by the government.
Myth: If the demand for tobacco falls there will be permanent job losses in many countries.
Fact: Only a few jobs in low-and-middle-income countries (LMICs) are heavily dependent on tobacco production, even in large producer countries, there would be no net loss of jobs due to declining consumption. With few exceptions, the share of total employment involved with tobacco is already very small. For example, in China, the world’s largest producer and consumer of tobacco products, only about 2% of its farmers are growing tobacco. In some cases, there may even be gains; if people do not buy cigarettes, they will be able to spend their money on other goods and services; lost jobs will be replaced with new ones. Consumer spending will shift to non-tobacco sources of livelihood, creating alternative jobs. Even if tax increases were introduced right away, the decline in smoking and jobs would be gradual and the economy would have time to adjust. Many studies have shown that, over time, there is likely to be a net gain rather than a loss in employment in nearly all countries that raise tobacco excise rates.,
Myth: Higher cigarette taxes will result in more cigarette smuggling.
Fact: Smuggling is a serious problem that requires strict regulation. The smuggling activities are not necessarily a result of high tax rates in most countries according to surveys conducted in several countries with high tax rates. On the contrary, a European study revealed that a high magnitude of illicit trade occurs in countries with low tax rates, anyway. Even when smuggling occurs at high rates, tax increases still bring greater revenues and reduce consumption. Corruption and weak regulatory enforcement are among the main drivers of illicit trade; in some cases, the industry itself is involved and largely responsible for the smuggling activity. Indeed, tax administration is the main determinant for curbing illicit trade in tobacco products.
Penalizes the poor
Myth: Poor people are penalized more by increased tobacco taxes.
Fact: Existing taxes do consume a higher share of the income of poor consumers than rich consumers. However, poor smokers are usually more responsive to price increases than rich smokers, so their consumption of cigarettes will fall more sharply following a tax increase and their relative financial burden from ill-health will be correspondingly reduced. A 50-percent increase in cigarette prices will lead to a 30–40 percent decline in tobacco consumption for the poor, a much larger relative decline than among the rich. Some methods of compensation include making other taxation regimes more progressive or using some taxation revenues to subsidize cessation programmes and products as well as other services for the poor. The price-sensitive poor smokers will consider quitting and spending their income on other beneficial commodities such as food, health, and education. They will get the largest share of health and economic benefits from smoking cessation following a tax rate hike. Considering that people in poverty generally have poorer health as a result of smoking, a reduction in smoking may be of greater health benefit to poor people.
An unpopular action
Myth: Increasing tobacco taxes will be unpopular with the people, who do not support tax increases.
Fact: This is a myth designed to make governments feel nervous about losing popular support and, therefore, reluctant to raise taxes. Interestingly, while increasing taxes is generally unpopular with the community, it becomes a popular move if tied to funding public health, education, tobacco control or health promotion programmes.
Surveys carried out in Victoria, Western Australia, and Thailand prior to the introduction of tobacco legislation to raise tobacco taxes confirms this view. For example, in Victoria, a public opinion poll found that while only 47% of people approved of an increase in tobacco tax, that number rose to 84% when part of the tax was to be used for such programmes as health education, medical research, and funding for sports and the arts. That result was replicated in Thailand, where 80% of non-smokers surveyed and 65 % of smokers supported the tax increase when a proportion of the funds was to be directed to health promotion programmes.
It is important to measure public opinion. In these examples, polls have been used to dispel the myth that tax increases are always unpopular, a myth that has the potential to obstruct change.
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