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Taxation

Fake news: is smoking really increasing in Australia?

6 Sep, 17 | by Becky Freeman, Web Editor

Author:  Simon Chapman AO

This blog post originally appeared on Doctor Portal and is published here with permission.

ON 14 August, 2017, The Australian newspaper ran a story guaranteed to go viral. The headline screamed: “More smokers lighting up, despite the costs”. The journalist, Adam Creighton, who has, grotesquely, written about tobacco control being like Nazism, reported on a claim being made by Dr Colin Mendelsohn, “an expert in public health at the University of NSW”, that:

“an unexpected standstill in the national smoking rate since 2013, combined with rapid population growth, has pushed up the number of regular smokers by more than 21 000”.

The article said that Australia’s smoking rate was now higher than the United States’ rate for the first time in a decade.

“This is despite plain packaging and the most expensive cigarette prices in the world.”

The claim was covered widely across Australian media, with Dr Mendelsohn interviewed several times. Senator David Leyonhjelm issued a press release repeating the claim, which would have pleased his party’s tobacco industry donors.

I received enquiries from the US and England asking me if the claims were true. I immediately called fake news. Here’s the real story.

The Australian Institute of Health and Welfare (AIHW) surveys national smoking prevalence every 3 years as part of its National Drug Strategy Household Survey. We also have annual data from England and the US on smoking rates with which we can compare Australia’s progress.

In 2013, there were 16.4% of Australians aged 18 years and over who smoked. By 2016, this number had fallen to 15.7%. By contrast, the US rate for 2016 is 15.8%, a sliver higher than Australia’s 2016 rate. England’s rate in 2016, according to the long running Opinions and Lifestyle Survey, was 15.8%, again marginally higher than Australia’s.

So, if anything, the smoking rate in Australia is identical to or marginally lower than in the US and England in 2016

Australia’s fall from 16.4% in 2013 to 15.7% in 2016 was not statistically significant. Dr Mendelsohn has stated publicly that Australia’s historically continual fall in smoking has therefore “flatlined”. This is an interesting claim because any student of statistics knows that while you can always draw a line between two points, you need a bare minimum of three data points to determine a trend line, including a flatline.

Dr Mendelsohn is an enthusiastic proponent of e-cigarettes and appears to be using international comparisons to justify a call for making these more available in Australia.

In the US, smoking actually increased from 15.1% in 2015 (the figure that Dr Mendelsohn was citing) to 15.8% in 2016, despite (or perhaps partly because of) the nation being awash with e-cigarettes. But like Australia’s statistically insignificant fall in smoking, the rise in smoking in the US was also not statistically significant (see figure 8.1 here).

If Australian smoking has flatlined, consistency would demand that he also say the same of the US, which doesn’t yet appear to have been done.

And what about the extra 21 000 smokers estimated? The figure of 21 000 can be found nowhere in the AIHW tables of figures. No nation reports its progress against smoking by quoting changes in the total number of smokers: the universal practice is to report rates (ie, percentages of the population).

There were about 2.4 million smokers in Australia in 1945 (when 72% of men and 26% of women smoked) – in a population of 7.5 million. This is about the same as the number of smokers in the population today. If we are to look only at the actual number of smokers, some might argue that we have therefore achieved nothing in 70 years, despite smoking prevalence today being 15.7% (or 12.8% if daily smoking is the measure).

Dr Mendelsohn appears to have arrived at a figure of 21 000 extra smokers by multiplying the percentage of daily smokers listed for each year in Table 3 of the AIHW report, with an estimate of population numbers of Australians 18 years and over in June 2013 and 2016 released by the Australian Bureau of Statistics in June 2017. These population estimates were published some months after the AIHW would have undertaken the analysis of smoking prevalence for 2016 and some years after it released its estimate of prevalence in 2013.

The estimate ignores the complexity of how survey results are weighted by population composition. It also ignores the fact that the prevalence figure is only an estimate, with margins of error. The AIHW’s table of relative standard errors and margins of error indicates that the prevalence of daily smoking among people aged 18 years and over in 2016 was somewhere between 12.2% and 13.4%. This means that the number of smokers in 2016 could have been anywhere between 2 293 000 and 2 512 000. A similar range applies to the figure for 2013. The calculation of an extra 21 000 smokers between 2013-2016 is therefore essentially meaningless.

Moreeover, the Australian Bureau of Statistics population figures show that between 2013 and 2016, Australia’s population aged 18 years and over grew by 864 340 people as a result of births, deaths and immigration. Many immigrants in this number would be from nations where smoking rates are high, particularly among men.

The elephant in the room? Massive growth in never smokers from smoking prevention.

Media attention has focused on smokers. But applying the same calculation Dr Mendelsohn has done for current smokers to people in the rest of the population, one would conclude that there are more than 870 000 extra non-smokers in Australia in 2016 than there were in 2013 — more than 80 times the number of extra current smokers (and more than 40 times the number of extra daily smokers) that he is so concerned about.

The impact of policies such as tobacco tax, plain packs and graphic health warnings is not just judged on smoker numbers, but on quitters and most importantly, in terms of prevention: the proportion of the population who have never smoked. The Australian National Drug Strategy Household Survey reported a significant decline in the percentage of young people smoking and a significant increase overall in the proportion of people who have never smoked — see the # symbols on Table 3 in the spreadsheet here. These figures indicate substantial achievements.

The article in The Australian declared “Australia’s punitive and coercive policies have run out of steam”. I assume this refers to successive Australian governments’ tobacco tax increases. The first of these increases in 2010 saw the CEO of British American Tobacco Australia, David Crow, telling a Senate committee in 2011:

“We understand that the price going up when the excise goes up reduces consumption. We saw that last year very effectively with the increase in excise. There was a 25 per cent increase in the excise and we saw the volumes go down by about 10.2 per cent; there was about a 10.2 per cent reduction in the industry last year in Australia.”

These are the same tax increases that a coalition of New Zealand experts announced vert recently that they want their country to adopt, emulating Australia.

The government’s recent mid-term report on its National Tobacco Strategy has also highlighted the need to improve cessation rates, but it has also provided an overwhelmingly positive picture of progress in Australia — see table 1 in the detailed report here.

We’d all like to see smoking prevalence fall even faster than it currently is. But to argue that we are going backwards or stalling is simply wrong.

Simon Chapman AO is Emeritus Professor of Public Health at the University of Sydney.

A missed opportunity: The US Helsinki Commission hearing on the illicit tobacco trade in the OSCE region

25 Aug, 17 | by Marita Hefler, News Editor

 

Benoît Gomis, Kelley Lee, Ross MacKenzie

benoitg@sfu.ca

 

On 19 July 2017, the US Commission on Security and Cooperation in Europe (CSCE) – also known as the ‘Helsinki Commission’ – held a hearing on the illicit tobacco trade in the Organization for Security Co-operation in Europe (OSCE) region. The Helsinki Commission, an independent US government agency created in 1976 to “press governments to improve their human rights records and allow, despite Europe’s division, expanded contacts between people”, has discussed a number of important challenges, including human trafficking, anti-Semitism, treatment of ethnic minorities, weapons proliferation, corruption and terrorism. Through hearings, briefings, and official delegation visits, the Commission gathers evidence on such issues and contributes to the formulation and implementation of US policy towards the OSCE and its participating states.

To date, limited progress has been achieved on the illicit tobacco trade in the OSCE region. Globally, illicit tobacco accounts for around 11.6% (600 billion sticks) of supply, and US$40.5 billion in lost tax revenues annually. Despite the size and profitability of the trade, the risk of detection is relatively low and penalties generally light. In Europe, the illicit tobacco trade is estimated to be between 6 and 10% of overall consumption. Its nature has evolved from predominantly large-scale smuggling to include illegal manufacturing, including counterfeit production, cheap cigarette brands produced specifically for illicit markets overseas, and overproduction of regular cigarette brands. Overall, the illicit tobacco trade in the OSCE region reportedly stems from a murky blend of tobacco companies, including transnational tobacco companies (TTCs), and criminal elements, which both cooperate and compete for this lucrative trade. The latter includes criminal organizations which earn substantial income, while fuelling money laundering, corruption and other illicit activities. From a public health perspective, the illicit tobacco trade makes cigarettes more affordable and accessible, especially among youth and low-income populations, resulting in higher consumption.

In this context, a high-level public hearing by a US government agency on the issue of illicit tobacco trade is a much welcomed and timely opportunity to enhance understanding of the nature of the illicit trade in the OSCE region, the factors driving it, and the wider implications for the global community. This hearing is especially important given that the WHO Framework Convention on Tobacco Control (FCTC) Protocol to Eliminate Illicit Trade in Tobacco Products, adopted on 12 November 2012, has still to come into effect. At the time of writing, only 29 countries are party to the Protocol, with 12 more needed by 2 July 2018 for it to come into force. The US has yet to ratify the FCTC itself or sign the Protocol.

Unfortunately, given the selected range of issues addressed, and how they were framed in discussions, it is doubtful whether the hearing yielded any new insights. The panel of witnesses was composed of Louise Shelley, Professor of Public Policy at George Mason University, who researches transnational crime, terrorism and corruption, including the crime-terror nexus; David Sweanor, Adjunct Professor at the Faculty of Law, University of Ottawa, and a leading tobacco control expert whose areas of advocacy and research include extensive experience in analysing, monitoring, and litigating on, the global illicit cigarette trade; and Mark Firestone, Senior Vice President and General Counsel at Philip Morris International (PMI). While Sweanor and Shelley brought long standing experience in the illicit tobacco trade to the hearing, it notably did not include any representatives from law enforcement, regional experts, officials from any relevant international organization (e.g. WHO, Interpol, Europol, World Customs Organization, World Bank, United Nations Office on Drugs and Crime, or OSCE), or academics who have published relevant research on illicit tobacco.(see examples here, here, here and here.

The involvement of a representative of a leading transnational tobacco company in the panel seems particularly incongruous given substantial evidence of historical tobacco industry complicity in cigarette smuggling (see examples here and here)  and reports of their continued involvement. Tobacco companies have also generated inaccurate estimates of the size and nature of the illicit trade, and overstated the role of taxation, advertising restrictions, and packaging and labelling regulations as contributing factors. Further, industry lobbying against the illicit trade has focused on counterfeit products, a small portion of the total illegal cigarette market, as a distraction or means to further its own interests.

Guarding against industry interference is a key provision under the FCTC. Article 5.3 concerns the need for Parties to protect public health policies from “commercial and other vested interests of the tobacco industry”. Article 5.3 implementation guidelines recognise that some “interactions with the tobacco industry are necessary”, but recommends that these interactions be conducted in public, “for example through public hearings”. While the Helsinki Commission hearing was publicly held, as stated above, the odd balance of expertise, particularly the inclusion of a tobacco company representative, raises questions about industry interference.

Testimony provided raised a number of important points. Overall, however, the hearing did not adequately address four important issues. First, the complicity of the tobacco industry in the illicit tobacco trade was barely mentioned, as well as the ineffective law enforcement partnerships several tobacco companies have established with governments around the world. Instead, much of the discussion on the private sector focused on the role of new media in allowing users to post details about opportunities to purchase illicit cigarettes. Similarly, the growing role of tobacco companies independent of transnational tobacco companies, most notably in Asia, positioning themselves to ‘go global’ through legal and illicit trade, was not discussed. Effective efforts to address this substantial source of illegal activity depends on better understanding this complex and changing picture.

Second, there were several instances in which tax increases were brought up as the primary driver behind the illicit tobacco trade. This is a familiar industry-led narrative despite overwhelming evidence that this is not the case.

Third, there is an urgent need for independent data collection and analysis on the illicit trade. In many regions, the tobacco industry itself is the source of this information, even supplying data to public officials. Without reliable information on the scale of the problem and trends over time, it will be impossible to know how effective efforts are to curtail this illicit trade.

Finally, the importance of strengthening institutional capacity against the illicit trade was not discussed in depth. This would involve public health, customs and excise, and law enforcement agencies – with additional resources for a lead coordinating body, public awareness campaigns, and targeted enforcement along the entire production and distribution network including addressing the industry’s complicity.

Benoît Gomis is a research associate at Simon Fraser University, Canada where he focuses on the illicit tobacco trade in Latin America and the Caribbean, and an international security analyst. Kelley Lee is a Tier 1 Canada Research Chair in Global Health Governance, Simon Fraser University. Ross MacKenzie is a lecturer in Health Studies at Macquarie University, Australia. Their work is supported by the National Cancer Institute, US National Institutes of Health, Grant R01-CA091021

*This article was amended on 31 August 2017 to include additional details about the qualifications and experience of Louise Shelley and David Sweanor.

France: breaking new ground in tobacco control

2 Mar, 17 | by Marita Hefler, News Editor

The start of 2017 has seen tobacco control in France boosted with a series of ground-breaking tobacco control measures, as detailed in a recent article by Physicians for a Smoke-Free Canada.

After a phase-in period, cigarette plain packaging is fully in force as of 1 January 2017. As in other countries that have already introduced plain packaging, or are planning to do so, the tobacco industry and its mouthpieces fought strongly against the new law.

In a move which extends the impact of plain packaging, the French government has also applied Directive 2014/40 of the European Union, which directs member states to restrict tobacco presentation. On February 1, 2017 a regulation was issued that identifies product names judged to be contrary to the European Union Directive. The identified names will only be authorised for sale for one more year in France. Among the brand names and descriptors that will disappear from 2018 under the regulation are Vogue, Virginia Slims, Anis (licorice), Menthol and Biodegradable.

France has also introduced a new tax on tobacco company revenue. Expected to raise about 130 million Euros per year, the new funds will be used to finance further tobacco control initiatives. The measure is particularly significant because it closes a  loophole used by tobacco companies to avoid France’s high-tax regime.

To read the full details on the Physicians for a Smoke-Free Canada website click here.

Industry-funded International Tax and Investment Center responds to criticism by attempting to muddy the waters

24 Jun, 16 | by Marita Hefler, News Editor

Karen A Evans-Reeves, Anna B Gilmore and Andy Rowell

Tobacco Control Research Group, University of Bath,

The tobacco industry is under attack. In just two weeks, in May 2016, its tactic of challenging any law that threatens its profits, took a big hit. The arbitration panel, that tobacco giant Philip Morris International (PMI) had hoped would overturn standardised packaging legislation in Australia, published its full ruling that the company’s self-serving claims were inadmissible. Just days later, all four major tobacco companies lost their challenges against both the European Union’s Tobacco Products Directive and standardised packaging legislation in the UK.

The UK, France and Ireland, which have already enacted standardised packaging legislation, will now go ahead with this brand removal. Further afield Canada, New Zealand, Hungary and Norway are due to follow suit and other countries which have expressed an interest will be buoyed by the way the industry’s legal and trade challenges to plain packs are being soundly rejected. The World Health Organization’s (WHO) slogan for World No Tobacco Day 2016 was “Get Ready for Plain Packaging” recognising that the removal of branded tobacco packaging is “going global.”

Each jurisdiction to consider standardised packaging legislation has received sustained attacks from tobacco companies, using both their own voices and those of third parties which they fund. By commissioning and publicising research reports and opinions from seemingly independent experts, tobacco companies have created not only the impression of a large network of opposition but of an illusory body of evidence, particularly in relation to the industry argument that standardised packaging will increase the illicit tobacco trade.

PMI private documents, leaked to Action on Smoking and Health (UK), revealed that “broad third-party media engagement” and “high profile opinion pieces” would be used to raise awareness of such arguments among “decision makers and the general public” as part of its attempt to prevent standardised packaging in the UK. These documents also revealed that PMI intended to use the International Tax and Investment Centre (ITIC) as one of its key “media messengers”. Since 2012, PMI has paid ITIC (in collaboration with global advisory firm, Oxford Economics) to produce annual reports on the illicit trade in Asia. These claimed that illicit trade is increasing in the region but have been accused of being methodologically flawed. When publicly available routine data was used in an attempt to replicate ITIC’s findings in Hong Kong, illicit levels were found to be under half of what ITIC had estimated.

Key to the industry’s use of third parties is its attempt to shift the paradigm by presenting third parties as ‘independent experts’ and their research as ‘trustworthy and rigorous’ while simultaneously positioning public health academics as ‘advocates’ and ‘zealots’ and their research as ‘advocacy’. This presentation of corporate pawns as informed moderates producing quality work and public health researchers as misguided fundamentalists producing poor quality work is a public relations tactic employed for decades by corporations in relation to environmental and health issues.

Over the last few weeks this tactic has been adopted by the tobacco industry third party, ITIC, in a series of letters sent to Non-Governmental Organisations (South East Asia Tobacco Control Alliance (SEATCA), ASH (UK), EU SmokeFree Partnership), the University of Bath in the UK, and the Editors of Tobacco Control, all of whom had criticised ITIC’s activities, some in letters, reports and webpages. ITIC’s letters made three inter-related claims, each of which we explore in the paragraphs below.

First, that public health research should be seen as advocacy while, by contrast, ITIC’s research (none of which appears to be peer-reviewed) should be seen as high quality. For example, in his letter to the University of Bath the President of ITIC, Daniel Witt, claimed:

We have become increasingly concerned about how the integrity of reputable institutions and individuals is maligned by overzealous advocacy ….. and ….by what passes for academic research when it is clearly constructed to fulfil an advocacy agenda”.

This denigration of public health research has been strongly criticised by independent experts. In her 2006 verdict in an extortion case against the tobacco industry in the United States Judge Gladys Kessler noted:

Much of the Defendants’ [i.e. the tobacco industry’s] criticisms of Government witnesses focused on the fact that these witnesses had been long-time, devoted members of “the public health community.” To suggest that they were presenting inaccurate, untruthful, or unreliable testimony because they had spent their professional lives trying to improve the public health of this country is patently absurd”.

The recent high court ruling on the challenges made by British American Tobacco, PMI, Japan Tobacco International and Imperial Tobacco to UK standardised packaging legislation made a similar point, citing Sir Cyril Chantler’s 2015 review of the evidence:

Chantler … rejected the criticism made by the tobacco companies that those that advised the Government were biased against the industry. Conversely, he articulated scepticism about the methodological efficacy of research results generated by the tobacco companies. He also criticised the tobacco companies for adopting unrealistic criticisms of the output of existing researchers…

This ruling drew upon two peer-reviewed papers, one confirming the poor quality of industry evidence in comparison to public health evidence on standardised packaging and the other paper showing how BAT and JTI  went about distorting and misrepresenting public health evidence.

ITIC’s second claim is that it is not a lobby group. Yet based on widely accepted definitions of lobbying, ITIC’s own descriptions of its activities, and the global health communities’ observations of its behaviour, ITIC clearly acts as a lobbying organisation. Indeed, it has persistently boasted of its lobbying success. in 1995, ITIC produced a document which outlined how “ITIC has developed trusted, advisory relationships with key, senior-level policy makers…..[which]…provide channels for private sector expertise to reach the Government before, during and after the official policy-making process. This combination…… provides ITIC and its sponsors a ‘seat at the policy-making table’”. And in 2004, Daniel Witt, ITIC’s President noted: “ITIC is a public policy organization actively working to change public policy in a pro-investment direction.” Although ITIC claims to be an “independent, non-profit research and educational organization” it receives tobacco company funding and has industry representatives on its Board of Directors.  Outputs such as the Asia-11 and Asia-14 illicit trade indicator studies, commissioned by PMI and published by ITIC along with global advisory firm Oxford Economics, have been critiqued by Dr Hana Ross (on behalf of SEATCA) for opaque methodology and “unverifiable” results that were “inconsistent with results from other studies” in the region (for more on this issue, read here). In 2014, ITIC attempted to destabilise the proposed guidelines on tobacco tax and price policy by convening a meeting with Parties and Observers to the Framework Convention on Tobacco Control (FCTC) immediately prior to the sixth Conference of the Parties (COP6). The Convention’s Secretariat blasted ITIC for this move.

Finally, in each letter, ITIC’s President, Daniel Witt argues that public health organisations ought to engage with ITIC given its tax expertise. This position displays a fundamental misunderstanding of the FCTC’s Article 5.3 which aims to protect policy making from the vested interests of the tobacco industry. It also displays a fundamental lack of understanding of public attitudes to ITIC. For example, the World Bank withdrew from an ITIC event in India, following a letter from the Institute of Public Health in the country,  similarly, following a letter from ASH (UK), the UK Department for International Development (DfiD) asked ITIC to remove its name, from its list of sponsors on ITIC’s website as DfiD has never been a sponsor, and the FCTC Secretariat has urged all governments not to engage with ITIC.

SEATCA and the University of Bath have respectively published and sent to ITIC detailed rebuttals of ITIC’s letters to them. These rebuttals and the aforementioned high court rulings are unlikely to deter ITIC from trying to influence tobacco control policies such as standardised packaging across the globe and undermining Article 5.3 of the FCTC. But the more people who reject engagement with ITIC, the harder it will be for ITIC to boast that it can get its tobacco industry clients a “seat at the policy making table”.

Southeast Asia: new tobacco tax index

11 Oct, 15 | by Marita Hefler, News Editor

The world’s first tobacco taxation index by a civil society organisation has been published by the Southeast Asia Tobacco Control Alliance (SEATCA). The report monitors implementation of the WHO Framework Convention on Tobacco Control (FCTC) Article 6 guidelines on price and tax measures.

Southeast Asia is home to approximately 10% of the world’s 1 billion smokers and is a prime growth market for tobacco companies.

The report can be accessed by clicking this link.

SEATCA report

Indonesia: court upholds tobacco tax to fund health

4 Oct, 14 | by Marita Hefler, News Editor

Abdillah Ahsan
Faculty of Economics, University of Indonesia

Good news on tobacco control from Indonesia is rare. Recently, however there was a victory in the area of tobacco tax.

On 1 January 2014, Law No. 28 of 2009 on regional taxes was introduced, which allows local provinces in Indonesia to charge a local tax to cigarettes. The tariff is 10% of cigarette excise.

This tax collectively amounts to about USD 796 Million, a significant sum. Following successful international examples for funding tobacco control, a minimum of 50% of the funds raised from the tax are to be used for health promotion, in particular through public anti-smoking campaigns and enforcing smoke free public spaces. This means local governments have the authority to decide on strengthening tobacco control measures for their provinces and cities.

Unfortunately, five smokers challenged this cigarette tax policy in the Constitutional Court, calling for its abolition. Their argument was that the policy harms the constitutional rights of cigarette smokers as consumers by requiring them to pay both excise tax and local cigarette tax. They argued this amounts to double taxation, which is prohibited by the tax law and is unjust.

However public health won, and the suit was rejected by the Constitutional Court in May 19, 2014. In the judgment, the Court stated that in accordance with Law No. 11/1995 on Excise Tax, the subject of excise tax is manufacturers, distributors, and importers, while its object includes cigarettes, cigars, tobacco leaf and tobacco strips. In the provisions of Articles 26 and 27 of the Local Tax Law on the other hand, the object of local cigarette taxes is consumption of cigarettes and the subject of this tax is cigarette consumers. “Thus, there is a difference between the object and the subject of excise tax in comparison to the object and subject of local cigarette tax,” said one of the Constitutional Judges.

The Court ruled that the cigarette excise tax paid together with local cigarette tax is the “politics of taxation” to increase state revenues as well as provide compensation on the negative health impacts of smoking. According to the judge, “Simultaneous excise tax and local cigarette tax have positive impact on reducing cigarette consumption and improve society’s health.”

Several benefits will arise from the Court’s rejection of the suit and implementation of the tax. The first is that the local cigarette tax will increase cigarette prices, thereby making cigarettes less affordable, and in turn likely direct reducing smoking uptake among children. The second benefit is local governments will receive increased funds as revenue to go towards local development and increased living standards. A third benefit is the increased funding available to be used exclusively for health promotion and law enforcement. This includes anti-tobacco campaigns and strengthened enforcement of tobacco control regulations such as non smoking areas.

Together, these measures will change the scenario of tobacco control at the local level and enhance local government efforts to better protect children and the poor from the harms of tobacco. It represents a welcome step forward in a country that has been dubbed a paradise for tobacco companies due to lax regulation.

World No Tobacco Day – Special Isssue

30 May, 14 | by Becky Freeman, Web Editor

To mark World No Tobacco Day 2014, the BMJ has published a special online issue of Tobacco Control with the theme taxes, prices and illicit trade. The issue includes several open access research papers and editorials.

The complete table of contents can be found here.

We’d also like to take this opportunity to congratulate our Editorial Board chair, Professor Ken Warner, and Economics editor, Professor Frank Chaloupka on being awarded a WHO World No Tobacco Day Award.

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On World No Tobacco Day (31 May), WHO calls on countries to raise taxes on tobacco to encourage users to stop and prevent other people from becoming addicted to tobacco. Based on 2012 data, WHO estimates that by increasing tobacco taxes by 50%, all countries would reduce the number of smokers by 49 million within the next 3 years and ultimately save 11 million lives.

Today, every 6 seconds someone dies from tobacco use. Tobacco kills up to half of its users. It also incurs considerable costs for families, businesses and governments. Treating tobacco-related diseases like cancer and heart disease is expensive. And as tobacco-related disease and death often strikes people in the prime of their working lives, productivity and incomes fall.

“Raising taxes on tobacco is the most effective way to reduce use and save lives,” says WHO Director-General Dr Margaret Chan. “Determined action on tobacco tax policy hits the industry where it hurts.”

The young and poor people benefit most

High prices are particularly effective in discouraging young people (who often have more limited incomes than older adults) from taking up smoking. They also encourage existing young smokers to either reduce their use of tobacco or quit altogether.

“Price increases are 2 to 3 times more effective in reducing tobacco use among young people than among older adults,” says Dr Douglas Bettcher, Director of the Department for Prevention of Noncommunicable Diseases at WHO. “Tax policy can be divisive, but this is the tax rise everyone can support. As tobacco taxes go up, death and disease go down.”

Good for economies too

WHO calculates that if all countries increased tobacco taxes by 50% per pack, governments would earn an extra US$ 101 billion in global revenue.

“These additional funds could – and should – be used to advance health and other social programmes,” adds Dr Bettcher.

Countries such as France and the Philippines have already seen the benefits of imposing high taxes on tobacco. Between the early 1990s and 2005, France tripled its inflation-adjusted cigarette prices. This was followed by sales falling by more than 50%. A few years later the number of young men dying from lung cancer in France started to go down. In the Philippines, one year after increasing taxes, the Government has collected more than the expected revenue and plans to spend 85% of this on health services.

Tobacco taxes are a core element of tobacco control

Tobacco use is the world’s leading preventable cause of death. Tobacco kills nearly 6 million people each year, of which more than 600 000 are non-smokers dying from breathing second-hand smoke. If no action is taken, tobacco will kill more than 8 million people every year by 2030, more than 80% of them among people living in low- and middle-income countries.

Raising taxes on tobacco in support of the reduction of tobacco consumption is a core element of the WHO Framework Convention on Tobacco Control (FCTC), an international treaty that entered into force in 2005 and has been endorsed by 178 Parties. Article 6 of the WHO FCTC, Price and Tax Measures to Reduce the Demand for Tobacco, recognizes that “price and tax measures are an effective and important means of reducing tobacco consumption by various segments of the population, in particular young persons”.

Tobacco industry-commissioned report: large decline in EU consumption, almost no change in illegal trade

4 Jun, 13 | by Marita Hefler, News Editor

Konstantin Krasovsky

Alcohol and Drug Information Center (ADIC-Ukraine), Kiev, Ukraine

krasovskyk@gmail.com

On April 17, 2013 Philip Morris International (PMI) issued a press release, based on an annual study conducted by KPMG. PMI claimed the most significant finding of the study is that: “For the sixth year in a row, the illegal trade of cigarettes in the European Union reached a new record high: in 2012 the levels rose to 11.1%, compared to 10.4% in 2011.”

However, further analysis tells a different story. It is true the numbers show that proportion of illegal sales increased as a percentage of total tobacco sales; however this is actually due to an overall decline in the EU tobacco market. The volume of the illegal cigarette trade has barely changed.

Total cigarette consumption in the EU declined from 720 billion cigarettes in 2007 to 593 billion cigarettes in 2012, a decrease of 127 billion. By comparison, in the same time period illicit cigarette consumption increased from 60.6 billion cigarettes to 65.5 billion, an increase of just 4.9 billion. In other words, the illicit trade increase compensated for only 4% of the legal sales decrease.

The decline in total cigarette consumption was partly compensated by the increase in other tobacco products consumption. Even so, the total consumption of tobacco decreased in the 2007-2012 period from 817 billion to 739 billion cigarette equivalents. Overall illicit tobacco sales (cigarettes and other products) in fact decreased in 2007-2012 from 91 billion to 90 billion cigarette equivalents.

The 2012 PMI Annual Report discloses the reason behind the sales reduction: “The total cigarette market in the EU declined … due primarily to tax-driven price increases”.

Despite the legal sales reduction, most EU countries did not experience an increase in illicit sales. If just one of 27 EU countries (Italy) is excluded from the KPMG 2012 Report, the illicit cigarette consumption in the remaining 26 EU countries declined from 59.4 billion cigarettes in 2011 to 57.4 billion cigarettes in 2012.

In Italy, total (licit+ illicit) cigarette consumption has declined from 90.4 billion cigarettes in 2011 to 85.9 billion cigarettes in 2012, despite some increase of illicit sales in 2012. Again, the reason can be found in the PMI Annual Report: “In Italy, the total cigarette market was down … in 2012, reflecting the impact of price increases in 2011 and March 2012.”

Philip Morris’s press release is a misrepresentation of the findings of the KPMG report. In reality, the report revealed that tobacco tax hikes in the EU countries effectively reduced tobacco consumption and had no consistent impact on increasing the illicit market.

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