1. Description of the earmarked tax 

The official designation of the earmarked tax on tobacco is the “contribution for health applied on tobacco and alcohol products”, known popularly as the “tax on vice”. It was introduced in 2005 by the law for health reform (Law no. 95/ 2005) to “combat excessive use of tobacco and alcohol products and funding of health costs”. Implementation began in 2006. The tax is calculated as a fixed amount per unit of tobacco product: 10 € per 1000 cigarettes, cigars, cigarillos and other tobacco products or 13 € per kg of smoking tobacco. Tobacco products for oral use are banned, and the electronic cigarettes are not yet regulated. 

The tax is paid every month by the legal entity responsible for the trade of tobacco products (importation or manufacture) in Romania, on the basis of the quantity sold in the previous month. The payment is made in the national currency (leu) into an account for the Ministry of Health at the County Public Finance Treasury. Thus, all revenue from the earmarked tax on tobacco is transferred directly to the Ministry, which manages and uses the funds, with no interference in allocating funds but according to Law 95/ 2005: investments in health system infrastructure, national public health programmes (including for tobacco control) and other health-related services. 

The earmarked tax is only part of the tax on tobacco products and the legal entity pays the difference between excise owed and earmarked tax into another account, also opened at the County Public Finance Treasury but belonging to the Ministry of Finance. The method for calculating the exchange rate between the euro and the leu is the same as that used to calculate the excise value, which has been modified over time: 

  • During 2006–2013, the tax was fixed and varied only subject to changes in the exchange rate between the euro and the lei published in the Official Journal of the European Union every 1 October; 
  • From 2014, all excises and taxes are calculated directly in lei and are not influenced
    by the exchange rate. They are, however, adjusted to inflation (the annual average of the index of consumer prices) at the beginning of each year, in the framework of a law that changed the entire excise system (all excise is now adjusted yearly to inflation). 

As the earmarked tax on tobacco and the excise are paid monthly by the importer or manufacturer at the same time and in the same place but in two different accounts to two ministries, the revenue flows are predictable and regular and are not influenced by other interventions. 

The revenues from the earmarked tax are fungible and are used according to the priorities established by the Ministry of Health. The precise activities and programmes funded from these revenues, their budgets and their reporting and monitoring requirements cannot, however, be identified. The earmarked funds go into the pool of “specific (own) revenues”, with the revenue from the“ clawback” tax[1] (until 2011; since 2012, this tax is paid to the Health Assurance House), earmarked tax on alcohol and various administrative taxes. This pool is separate from the State budget. Thus, the Ministry of Health funds consist of the pool of own revenues plus the State budget, in distinct accounts, with different rules for spending the money. For example, funds from the State must be spent during one fiscal year (1 January–31 December); any unspent funds are returned to the State budget, whereas “own” funds can be used the following year.

  1. Process that led to adoption of the earmarked tax 

The process of establishing an earmarked tax on tobacco products was led by the Ministry of Health as part of health sector reform starting in 2004 and was fully implemented and operational in 2006. The process was facilitated by a favourable context for tobacco control measures, both nationally (two European Union directives with regard to tobacco products) and internationally (ratification of the WHO FCTC). Thus, a specific strategy or research was unnecessary, as long as there was consensus between the ministers of finance and health. 

The initial proposal for the amount of the tax was maintained throughout the process, but there was some discussion about inclusion of the earmarked tax into total excise. In the initial proposal, the earmarked tax was not part of the excise but was levied from the final price (after exclusion of VAT) for the benefit of public health, because it increased the final price. The solution adopted was to levy the tax from the excise under the provisions of the European Union Tobacco Taxation Directive. The main challenge was to define the administrative pathway for collection of the tax and to channel the funds directly to the Ministry of Health, without an excessive administrative burden on local fiscal authorities. 

Resistance was put up by tobacco product manufacturers and importers, sustained by the mass media, as there was no ban of advertising in printed media and no major actions or campaigns were run to provide correct information about tobacco control. Wide “fear-appeal” tactics were used, with forecasts of increased illicit trade and smuggling and a decreased State budget, with compassion for smokers who were being urged to quit. The only arguments against mass media offensive were based on the few international data showing a beneficial impact of increased price on smoking prevalence, as no national data were available. During the Parliamentary debate on the law, the best argument was the expected increase in revenue for the Ministry of Health, which could be used to improve the health infrastructure and services. 

A strong, effective argument used during public debates by officials of the Ministry of Health was the ethical aspect of the measure: smokers would have to pay more to the public health system as they use medical services more frequently. In return, the Ministry would support them in giving up smoking. 

The three main reasons for adoption of the law were: 

  1. the international political momentum: As Romania was preparing to join the European Union and to ratify the WHO FCTC; “tobacco control” was on the mainstream political agenda.
  2. political consensus between the Minister of Finance and the Minister of Health: The fact that both ministers were expert economists was an important advantage, as they were able to focus on facing resistance and obstacles.
  3. the national context necessity to reform the health system: As supplementary funds were required for new health infrastructure and new medical services, revenues from tobacco product use appeared both ethical and efficient. 
  1. Statistics on the earmarked funds and their use 

The amounts collected between 2006 and 2014 varied according to the euro/leu exchange rate and the number of tobacco product units sold (Table 1). The proportion of the funds in total health budget is presented in Table 1. The ratio between the earmarked revenues and the state budget allocated to the Ministry of Health is quite constant, demonstrating that the introduction of the earmarked tax did not decrease the amount allocated by the governments for the health sector. By contrary, in 2013 and 2014 these allocations were bigger because of increasing of expenses due to some internal particularities. Thus, the tobacco tax was additive to the parts of the health budget coming directly from governmental sources. 

Table 1. Revenues of the Ministry of Health according to source, 2006–2014
Source: Ministry of Health 

The overall health budget comprises funds from the national health insurance and the budget of the Ministry of Health. The national health insurance budget is derived from health insurance paid by individuals and legal entities and a State budget allocation to cover expenditure. The Ministry of Health budget is constituted of funds allocated by the State budget, the Ministry’s 

“own” revenues and other resources, such as external funds. The specific (own) revenues of the Ministry of Health comprise the earmarked tax on tobacco products, the earmarked tax on alcohol products, the earmarked tax on advertising for tobacco and alcohol products, the clawback tax (until 2011) and other specific revenue, like taxes. 

The activities implemented by the Ministry of Health are financed from the two main budget lines, the State budget and own revenues, according to the main category of expense (personnel, ser- vices, goods, capital and financial expenses) and not by type of activity. Although it is impossible to specify the amount budgeted or expended from earmarked tax by type of activity, more than 50% of total specific revenue comes from the tobacco tax. As the specific revenues are spent mainly on infrastructure for the health system and for health programmes (including new drugs and methods for diagnosis and treatment of patients), it can be concluded that the earmarked tax on tobacco products is used for the modernization and expansion of the health system. 

One of the most important advantages of the funds obtained from tobacco taxation is their flexibility. Thus, the Ministry of Health can finance innovative programmes (such as human papillomavirus vaccination of young adolescents, fertilization in vitro, screening for cervix cancer), new techniques (such as interventional radiology, minimal invasive robotic surgery, minimal surgical therapy for resistant epilepsy) and social programmes (covering 90% of the cost of medications for people with an income below the minimal national salary). These programmes were financed for one or more years and, depending on their efficiency, were transferred to the National Health Insurance House for funding. 

Another advantage of these funds is their availability: their collection and transfer are continuous and relatively predictable, as they are independent of political influence. Thus, the funds can be used when a health priority occurs. For instance, the past 3 years of explosive development in organ transplant, including stem cells, was due to increased funding for these activities from specific revenues (Table 2). 

Table 2. Budget allocations for transplant activities, 2011–2013, according to budget source
Source: Ministry of Health

These funds were also the main source for financing the emergency system from the beginning of collection of the earmarked tax, as the infrastructure developed each year (Table 3). Since 2012, almost all costs are covered from this budget line. Today, the Romanian emergency system is very effective and is an example of good practice. 

Table 3. Budget and certain acquisitions of the emergency system2 
Source: Ministry of Health

The sources of funding and the expenditures of the Ministry of Health are illustrated in Fig. 1. 

Fig. 1. Sources of funding and expenditures of the Ministry of Health
Report of activities of the Ministry of Health, 2011–2013]. Bucharest: Ministry of Health (http://

  1. Impact of the tax 

By financing modern treatment of myocardial infarction (percutaneous coronary interventions), the earmarked tobacco tax contributed to a decrease in overall in-hospital mortality from this condition from 13.5% in 2009 to 9.93% in 2011 The reduction was more evident in centres with percutaneous coronary facilities (7.28% mortality rate) than in those without (14.2%)[2],[3]Unpublished estimates[4] show better results for overall in-hospital mortality in 2013: 8% at national level and 4–4.5%% in specialized clinics. The treatment has been funded since 2010, but, since 2013, it has been funded exclusively from specific revenues (Table 4) through a national programme that covers all the necessary instruments; national health insurance covers the cost of medical services. 

Table 4. Budget allocation for cardiovascular programme, 2011–2013, according to budget source2
Source: Ministry of Health

Many tobacco control measures were implemented in 2007–2008, but the only measure taken by the Government after 2009 was a permanent increase in the level of excise tax adopted to comply with the provisions of the Tobacco Products Taxation directive. This increase in the price of tobacco products (also encouraged by the earmarked tax) affected the prevalence of daily smoking, which decreased from 30.9% in 2008 to 24.3% in 2011[5]. The European Commission study on the attitudes of Europeans to tobacco use[6]. also showed a decrease in the prevalence but different values were estimated. Results reported a decrease of daily smoking from 30% in 2012 to 27% in 2014. The difference in results can be explained by the difference in methodology used in comparison with the Global Adult Tobacco Survey[5].

  1. Challenges in implementation of the policy 

The earmarking policy is the victim of its own success: as the number of smokers decreases, the number of packs of tobacco sold legally also decreases, as eventually does the revenue from the earmarked tobacco tax, despite adjustment for inflation. Taxes will have to be increased further in order to compensate for the decrease in the number of tobacco users. 

Another challenge is the increased administrative workload, as the institutions financed by the Ministry of Health receive funds from two different budgets. Additionally, as smokers and the mass media know that part of the excise is transferred to the Ministry of Health, they are expecting clarifications about how the money is spent. The workload of the communications department is therefore also increased. This also increases accountability and transparency for good implementation of the earmarked tax. 

The way in which the earmarked tax is calculated makes it easy to collect and to monitor transfer to the Ministry of Health. The transparency in allocation of the funds and the sums allocated to tobacco control programmes could be improved, which would foster public support for increasing the tax. As the tax is part of excise, however, the Ministry of Finance is reluctant to increasing the amount. 


[1] The“clawback”tax represents an agreement between a company or organization and the Government, in which the company agrees to repay Government benefits at a higher tax at a later date. In Romania, this tax was paid by pharmaceutical companies producing drugs that are reimbursed by public health insurance (reimbursement varies between 20% and 100%) and by the Ministry of Health through national programmes, in which all drugs are reim- bursed 100%. As part of the clawback tax on medicines, the producers paid a quarterly contribution for compensated drugs, which was calculated by applying a percentage to the value of the sales of each producer. 

[2] Raport de activiate al Ministerului Sanatatii pentru anul 2011–2013 [Report of activities of the Ministry of Health, 2011–2013]. Bucharest: Ministry of Health (http://

[3] Tau-Chitoiu G, Arafat R, Deleanu D, Vinereanu D, Udroiu C, Petris A. Impact of the Romanian national programme for interventional therapy in ST-elevation myocardial infarction. EuroIntervention 2012;6:126–132.

[4] pandeste-pe-copii/ 

[5] Global Adult Tobacco Survey (GATS), Romania 2011. (GATS report: http://www.who. int/tobacco/surveillance/survey/gats/gats_romania_report_2011.pdf )

[6] Attitudes of Europeans towards tobacco and electronic cigarettes (Special Eurobarometer 429). Brussels, European Commission ( index_en.htm). 

Related report

World Health Organization. (2016). Earmarked tobacco taxes: lessons learnt from nine countries. Geneva, World Health Organization.

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