Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements
Tobacco taxes are recognized as an effective policy tool to reduce tobacco consumption and improve health outcomes; however, policy makers often hesitate to use them because of their possible regressive effects. This report assesses the ability of...
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| Format: | Policy Note |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/893811554737147697/Is-Tobacco-Taxation-Regressive-Evidence-on-Public-Health-Domestic-Resource-Mobilization-and-Equity-Improvements http://hdl.handle.net/10986/31575 |
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okr-10986-315752021-05-25T09:23:00Z Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements Fuchs, Alan Marquez, Patricio V. Dutta, Sheila Gonzalez Icaza, Fernanda TOBACCO CONTROL TOBACCO TAX TAXATION EQUITY REVENUE MOBILIZATION PUBLIC HEALTH SIN TAX PRICE ELASTICITY TOBACCO CONSUMPTION COST BENEFIT ANALYSIS Tobacco taxes are recognized as an effective policy tool to reduce tobacco consumption and improve health outcomes; however, policy makers often hesitate to use them because of their possible regressive effects. This report assesses the ability of taxes on tobacco to improve future health and welfare outcomes, with a focus on their distributional impact and effects on the poor. In addition to adverse consequences on health and quality of life of smokers and their family members, tobacco-related illnesses cost billions of dollars in medical expenditures and losses in human capital and productivity, imposing heavy economic tolls on households and governments. Developing countries bear a high and increasing share of the economic burden of tobacco. However, traditional analyses often overlook the many economic benefits of reducing tobacco consumption. This report presents empirical findings using an extended cost benefit analysis (ECBA) methodology, to incorporate a more comprehensive view of the costs and benefits of increasing prices of tobacco on household welfare, and to assess their distributional impact by accounting for different consumer behaviors across income groups. Evidence for several countries shows that large price shocks on cigarettes can generate progressive and welfare-improving medium and long-term net impacts, that particularly improve welfare of lower-income households. Large shares of societies—and particularly the poor—can benefit from positive income gains by reducing tobacco-related medical expenses and avoiding premature deaths. Moreover, additional fiscal revenues generated may be used to further enhance measures to control tobacco and promote equity. Ultimately, the benefits and distributional impact of raising taxes on tobacco will depend on the ability of policy to understand and to leverage consumers' responses toward quitting tobacco, and to target comprehensive interventions to help the most vulnerable groups. 2019-04-23T16:57:47Z 2019-04-23T16:57:47Z 2019-04-01 Policy Note http://documents.worldbank.org/curated/en/893811554737147697/Is-Tobacco-Taxation-Regressive-Evidence-on-Public-Health-Domestic-Resource-Mobilization-and-Equity-Improvements http://hdl.handle.net/10986/31575 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Policy Notes Bangladesh Bosnia and Herzegovina Chile Indonesia Moldova Russian Federation South Africa Ukraine |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
TOBACCO CONTROL TOBACCO TAX TAXATION EQUITY REVENUE MOBILIZATION PUBLIC HEALTH SIN TAX PRICE ELASTICITY TOBACCO CONSUMPTION COST BENEFIT ANALYSIS |
| spellingShingle |
TOBACCO CONTROL TOBACCO TAX TAXATION EQUITY REVENUE MOBILIZATION PUBLIC HEALTH SIN TAX PRICE ELASTICITY TOBACCO CONSUMPTION COST BENEFIT ANALYSIS Fuchs, Alan Marquez, Patricio V. Dutta, Sheila Gonzalez Icaza, Fernanda Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements |
| geographic_facet |
Bangladesh Bosnia and Herzegovina Chile Indonesia Moldova Russian Federation South Africa Ukraine |
| description |
Tobacco taxes are recognized as an
effective policy tool to reduce tobacco consumption and
improve health outcomes; however, policy makers often
hesitate to use them because of their possible regressive
effects. This report assesses the ability of taxes on
tobacco to improve future health and welfare outcomes, with
a focus on their distributional impact and effects on the
poor. In addition to adverse consequences on health and
quality of life of smokers and their family members,
tobacco-related illnesses cost billions of dollars in
medical expenditures and losses in human capital and
productivity, imposing heavy economic tolls on households
and governments. Developing countries bear a high and
increasing share of the economic burden of tobacco. However,
traditional analyses often overlook the many economic
benefits of reducing tobacco consumption. This report
presents empirical findings using an extended cost benefit
analysis (ECBA) methodology, to incorporate a more
comprehensive view of the costs and benefits of increasing
prices of tobacco on household welfare, and to assess their
distributional impact by accounting for different consumer
behaviors across income groups. Evidence for several
countries shows that large price shocks on cigarettes can
generate progressive and welfare-improving medium and
long-term net impacts, that particularly improve welfare of
lower-income households. Large shares of societies—and
particularly the poor—can benefit from positive income gains
by reducing tobacco-related medical expenses and avoiding
premature deaths. Moreover, additional fiscal revenues
generated may be used to further enhance measures to control
tobacco and promote equity. Ultimately, the benefits and
distributional impact of raising taxes on tobacco will
depend on the ability of policy to understand and to
leverage consumers' responses toward quitting tobacco,
and to target comprehensive interventions to help the most
vulnerable groups. |
| format |
Policy Note |
| author |
Fuchs, Alan Marquez, Patricio V. Dutta, Sheila Gonzalez Icaza, Fernanda |
| author_facet |
Fuchs, Alan Marquez, Patricio V. Dutta, Sheila Gonzalez Icaza, Fernanda |
| author_sort |
Fuchs, Alan |
| title |
Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements |
| title_short |
Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements |
| title_full |
Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements |
| title_fullStr |
Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements |
| title_full_unstemmed |
Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements |
| title_sort |
is tobacco taxation regressive? evidence on public health, domestic resource mobilization, and equity improvements |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/893811554737147697/Is-Tobacco-Taxation-Regressive-Evidence-on-Public-Health-Domestic-Resource-Mobilization-and-Equity-Improvements http://hdl.handle.net/10986/31575 |
| _version_ |
1764474640673013760 |