Taxation and Price
"... Price and tax measures are an effective and important means of reducing tobacco consumption by various segments of the population, in particular young persons."
— World Health Organization Framework Convention on Tobacco Control
Increase Price, Reduce Consumption
The most direct and effective method for reducing tobacco consumption is to increase the price of tobacco products through tax increases. Higher tobacco prices encourage cessation among existing tobacco users, prevent initiation among potential users, and reduce the quantity of tobacco consumed among continuing users.
Higher taxes are particularly effective in reducing tobacco use among vulnerable populations, such as youth, pregnant women, and low-income smokers.
10 Percent for 10 Million Lives
An increase in tobacco prices by 10 percent decreases tobacco consumption by 4 percent in high-income countries and by about 6 percent in low- and middle-income countries. A price increase of 10 percent would reduce the number of smokers by 42 million worldwide and save 10 million lives.
Tax increases directly benefit governments through increased revenues. Every nation and sub-national entity that has significantly increased its tobacco tax has enjoyed substantial increases in revenue, even while reducing smoking. On average, across 181 countries that together represent 98% of the world’s smokers, a 10% increase in price due to an increase in the excise tax increases tax revenue by about 11%. Therefore, there is considerable potential for tobacco taxation to generate much-needed financing for development and health programs, particularly in low- and middle-income countries.
The World Bank recommends setting tobacco taxes to between two-thirds to four-fifths of retail price. Few low- and middle-income countries achieve this level of taxation, and most can significantly increase their tax levels.
Article 6 of the Framework Convention on Tobacco Control requires that Parties to the treaty consider tax policies and price polices as a part of their overall national health policy and recommends that governments raise tobacco taxes to reduce tobacco consumption.