A Quantitative Exploration of the Influence of Tobacco Use on Poverty in India.

INTRODUCTION: Tobacco use has a disproportionate impact on lower socioeconomic groups in India. The study quantifies the number of people who would fall under the national poverty line if the direct spending on tobacco and healthcare expenditures attributable to tobacco use were subtracted from their monthly expenditures. It also aims to estimate the extent to which tobacco use increases the probability of poverty status in India. AIMS AND METHODS: We quantify the increase in poverty by multiplying the difference between headcount ratios with and without tobacco-related spending by population size. We use propensity score matching to estimate the extent to which tobacco use increases the probability of poverty. RESULTS: About 18.4 million (1.5% of all Indians) are pushed into poverty due to either direct tobacco-related expenditures or tobacco-related healthcare spending. Tobacco use increases households' likelihood of being poor by 3.4%-3.7%. CONCLUSIONS: With over 22% of the global poor, achieving poverty reduction goals is a significant challenge for India. We show that this challenge is accentuated by increased tobacco spending, which pushes millions of Indians into poverty. To address this, the Government of India must implement both fiscal and non-fiscal policies that regulate tobacco use and, in turn, contribute to poverty reduction in the country. IMPLICATIONS: Tobacco use has a disproportionate impact on lower socioeconomic groups in India, leading to increased and deeper poverty. This paper finds that, based on existing proven measures of poverty, tobacco use accounts for an additional 18.4 million poor individuals. It also shows that tobacco use increases the likelihood of a household being classified as poor by 3.4% to 3.7%. As India is home to a significant proportion of the global poor, addressing tobacco use becomes crucial for global and domestic poverty reduction goals. Fiscal and non-fiscal policies can be used to regulate tobacco and potentially reduce poverty levels in India.

Global taxation of electronic nicotine and non-nicotine delivery systems: a cross-country evaluation.

BACKGROUND: Taxation is a key component of tobacco products' regulation given its proven effectiveness to generate revenue and achieve public health goals. The diversity of the market for e-cigarettes (electronic nicotine delivery systems and electronic non-nicotine delivery systems, ENDS/ENNDS) complicates comparative analyses per unit, thus challenging efforts to assess countries' excise tax burdens for e-cigarettes. Further complicating taxes on e-cigarettes is the necessity to balance two public health priorities: (1) deterring initiation among people who have never smoked, and (2) supporting cessation efforts among people currently smoking or who previously smoked. This study evaluates and compares excise tax burdens and tax system characteristics of e-cigarettes across 54 countries. METHODS: To determine countries' excise tax burdens per millilitre of e-liquid, we collect a unique database of tax characteristics and prices in countries where ENDS/ENNDS are currently sold. We calculate the excise tax per millilitre of e-liquid and convert e-liquid prices to a comparable price per millilitre across countries. RESULTS: Thirty countries employ a specific excise system, 10 apply an ad valorem system, 9 apply a tiered specific system, 1 applies a tiered ad valorem system and 4 apply a mixed tax system. The excise tax burden is highest in Belarus (87.2%, specific), Norway (81.2%, tiered specific) and Egypt (74.7%, mixed), and lowest in Costa Rica (7.4%, ad valorem), Paraguay (2.9%, ad valorem) and Croatia (0%, specific). CONCLUSION: The advantages of one tax system over another are context specific. Tax burdens tend to be much larger in countries that use a specific tax than in countries that use a value-based (ad valorem) tax.

The pass-through of excise taxes to market prices of heated tobacco products (HTPs) and cigarettes: a cross-country analysis.

BACKGROUND AND OBJECTIVE: The market for heated tobacco products (HTPs) has grown markedly in recent years, and many governments have started to tax HTPs to regulate their use. To evaluate the impacts of HTP taxes on tobacco use behaviors and health consequences, we first need to assess if they effectively raise HTP prices in a tax system that also taxes cigarettes. This study jointly evaluates the pass-through of taxes to prices of HTPs and cigarettes. DATA AND METHODS: We use a unique database on statutory HTP and cigarette taxes and retail prices of Marlboro-branded heated tobacco units and cigarettes from 2014 to 2021, developed by the Campaign for Tobacco Free Kids, in all countries where HTPs are sold. To estimate the pass-through of taxes to prices, we employ a seemingly unrelated regressions model. We also use an event study to test the impact of introducing HTPs to cigarette markets, as well as amending tax codes to include HTPs, on prices and price gaps. CONCLUSIONS AND POLICY IMPLICATIONS: Currently, the debate over whether HTPs should be taxed in comparison with cigarettes considers their potential harm reduction impact, and most countries tax HTPs at much lower rates than cigarettes in order to keep HTP prices lower than cigarette prices. However, the direct pass-through rate of HTP taxes to prices is several times smaller than that of cigarettes, resulting in very similar unit prices of HTPs and cigarettes. Further, while cigarette taxes are over-shifted to cigarette prices, HTP taxes are under-shifted to HTP prices, suggesting that tax gaps between the two products does not translate to price gaps. The results overall suggest that the lower taxes on HTPs do not lead to lower prices as compared to cigarettes and are unlikely to incentivize cigarette smokers to transition to HTPS for lower costs. Under this scenario, taxing both products equivalently could be an option to raise additional tax revenue.

The Effect of Price and Tax Policies on the Decision to Smoke or Use Smokeless Tobacco in India.

This paper investigates the impact of cigarette prices on adults' smoking and smokeless tobacco (SLT) use initiation and cessation decisions in India from 1980 to 2017. We use individual-level data from the 2017 Global Adult Tobacco Survey (GATS) to recreate the smoking history of current or past adult tobacco users using self-reported data on the years of tobacco use, initiation, and cessation merged with historical data on cigarettes, bidis, and SLT product prices. To estimate the effect of price changes on smoking and SLT use transitions, we use a pooled linear model and propensity score matching (PSM) to construct an artificial treatment group where weights capture the likelihood of being an ever-smoker. We find that price increases are a statistically significant deterrent to smoking initiation, with price elasticity of initiation being on average -0.0236 (CI: -0.024 -0.023) and -0.000428 (0.0 - 0.0) for smoking and SLT, respectively. This implies, for example, that a 10% increase in prices results in a 0.24% smaller smoking initiation and 0.004% smaller SLT use initiation. We find that prices can also encourage quitting, but the effects are not always significant, with elasticities of 0.0218 (CI: 0.017 0.026) and 0.0026 (CI: 0.001 0.004) for smoking and SLT, respectively. This implies that a 10% increase in prices will result in a 0.22% increase in the probability of quitting smoking and a 0.03% increase in the probability of quitting SLT use. The elasticity varied by income group, gender, and between young and all adults, with larger effects among lower-income adults and especially among young females. Higher cigarette prices that can be achieved by tobacco tax increases can significantly reduce initiation and encourage cessation, thus improving public health, especially among the most vulnerable population subgroups.

Healthcare Costs Attributable to Secondhand Smoke Exposure Among Indian Adults.

INTRODUCTION: In India, 38.7% of adults are exposed to SHS at home and 30.2% at work. This paper estimates the direct economic costs of diseases attributable to secondhand smoking (SHS) in India for persons aged 15 years and above. AIMS AND METHODS: Nationally representative data on healthcare expenditures, healthcare utilization, and SHS prevalence were used to estimate economic costs attributable to SHS. A prevalence-based attributable risk approach was used for estimating the attributable direct costs. To estimate the SHS-attributable fraction, the excess utilization of healthcare among SHS exposed non-smokers compared to unexposed non-smokers was estimated using a method of propensity score matching (PSM). RESULTS: The annual direct economic costs attributable to SHS from all diseases in India in the year 2017 for persons aged more than 15 years amounted to INR 566.7 billion (USD 8.7 billion). This amounted to INR 705 per adult non-smoker. The SHS attributable costs were higher among the youngest age group 20 to 24, and women bear 71% of the direct medical costs attributable to SHS. CONCLUSIONS: The annual direct economic costs of SHS amount to approximately 0.33% of India's Gross Domestic Product (GDP), or 8.1% of total healthcare expenditures in India. It is also much larger than the total excise tax revenue from cigarettes and bidis. As bidi smoking is the most popular form of smoking in India and bidis are mostly consumed by the poor, a disproportionate burden of SHS is likely borne by poor households in India. IMPLICATIONS: In India, 38.7% of adults are exposed to SHS at home and 30.2% at work. However, there is no estimate of the economic burden of any kind from SHS exposure in India. This study used a prevalence-based attributable risk approach combined with a PSM technique to estimate excess healthcare utilization for SHS exposed non-smokers and the annual direct economic costs of SHS in India. Annual direct SHS-attributable costs in India is INR 566.7 billion (USD 8.7 billion) SHS costs constituted 0.33% of GDP and 8.1% of healthcare expenditures in India.

Is Illicit Cigarette Market a Threat to Tobacco Control in Ethiopia?

INTRODUCTION: The presence of an illicit cigarette trade is used as an argument in Ethiopia to halt pro-health tobacco tax policies. The National Tobacco Enterprise (NTE) recently reported that the illicit cigarette market accounts for over 61% of the total market, and over 90% in the Eastern part of Ethiopia. AIMS AND METHODS: The aim of the study is to estimate the magnitude of the illicit cigarette trade in Ethiopia. We employed a cross-sectional observational study of empty packs collected in Ethiopia from retailers and from the streets in 10 towns, representing 10 regional states, and two autonomous cities. RESULTS: The majority (80.1%) of the 6438 empty cigarette packs collected (5368 from the streets and 1070 from retailers) belonged to locally produced brands, while the remaining 19.9% were foreign packs, including those allowed to trade in Ethiopia. Overall, 18.9% of the collected empty packs were classified as illicit. However, the share of illicit cigarette packs varied considerably across the country with as many as 97.7% of the packs collected near the Eastern border being illicit. Since the smoking prevalence is significantly higher in that part of Ethiopia, the weighted estimate of illicit cigarette market reached 45.4%. CONCLUSIONS: To address this alarming situation, Ethiopia should adopt technologies such as a track and trace system to control its cigarette supply chain, because cigarette packs currently bear no indication that the proper tax was paid. In addition, law enforcement and border security need to be strengthened, especially in the East. IMPLICATIONS: This is the first study to estimate the magnitude of the illicit cigarette trade in Ethiopia. It shows that the illicit cigarette trade is low in most parts of the country, but points to some problematic areas near the border with Somalia where illicit cigarette prevalence and overall smoking prevalence are high. We propose a solution to control illicit cigarette trade in Ethiopia that the whole region would benefit from.

Trends in affordability of tobacco products before and after the transition to GST in India.

OBJECTIVE: To estimate the trends in affordability of bidis, cigarettes and smokeless tobacco (SLT) in India and examine the impact of transition from the earlier indirect taxation system to the new goods and services tax (GST) on the affordability. METHODS: Retail price data and per-capita gross domestic product data were used to examine the trends in affordability of cigarettes, bidis and SLT from 2007-2008 to 2018-2019. Relative income price defined as the share of real per-capita income required to purchase a given quantity of a product was used to measure affordability. Changes in affordability were decomposed to disaggregate the effects of real prices or income changes. FINDINGS: On average, cigarettes, bidis and SLT have become increasingly affordable over the past 10 years. Bidis were found to be nine times more affordable than cigarettes. The GST has accentuated the increase in the affordability of cigarettes and SLT, and did not significantly alter the high affordability of bidis. In general, states with high (low) value-added tax rates during the pre-GST period experienced increases (decreases) in tobacco products' affordability after GST. CONCLUSION: Bidis continue to be highly affordable while the affordability of cigarettes and SLT increased mainly due to lack of any tax changes after GST and the growth in per-capita income. To effectively reduce affordability, significant increase in either the excise taxes and/or the compensation cess-a temporary duty in addition to GST-is warranted. Compensation cess should also be applied on bidis to address the huge tobacco use problem in India.

Taxation and inequality: Active and passive channels.

This paper fills an important gap in our understanding of the role of the US tax system in changing household welfare and inequality. It deconstructs the mechanisms by which the federal income tax system operates to affect the transmission of income shocks to consumption, and therefore, consumption inequality. To this end, it links micro and macro models of the distribution of income and consumption to changes in the federal income tax system. We find important changes in the types of income shocks to which consumers are insured or not, as well as the extent to which tax policy contributes to insuring consumers from these shocks. Importantly, we find that without decomposing the tax system into the three mechanisms outlined in the model, economists might have erroneously inferred that the role of tax policy as a mechanism for consumption insurance did not change over time. We also find that tax policy changes have disproportional effects across socioeconomic groups, and that this contributes to increasing inequality.

The effect of price and tax policies on the decision to smoke among men in Kenya.

AIMS: To assess the impact of cigarette prices on male smoking initiation and cessation in Kenya from 1960 to 2014. DESIGN: Longitudinal study using individual level data from the 2014 Global Adult Tobacco Survey (GATS) and historical data on cigarette prices. SETTING: Kenya. PARTICIPANTS: A total of 2079 men, among whom 619 identified as ever-smokers. MEASUREMENTS: Self-reported data on the years of smoking initiation and cessation, merged with historical data on cigarette prices. We employed several methodologies to estimate the effect of prices on smoking transitions, including a pooled linear model with propensity score matching (PSM). RESULTS: Price increases were negatively associated with smoking initiation, with price elasticity of initiation ranging from -0.03 (-0.066 to -0.000) to -0.14 (-0.216 to -0.0563). The association was two to three times larger for younger male adults compared with the average. Price increases were correlated with increased cessation for younger males, with a price elasticity of 0.08 (0.027-0.141) and for low-income males with a price elasticity of 0.16 (-0.752 to 0.429). CONCLUSIONS: Cigarette price increases in Kenya between 1960 and 2014 were negatively associated with males' smoking initiation and positively associated with younger and lower-income males' cessation.

Estimated impact of the GST on tobacco products in India.

OBJECTIVE: To examine the potential impact of the goods and services tax (GST) on price, consumption and tax revenue from tobacco products in India and across states. METHODS: Data on prices, tax rates and tax revenue are used to estimate a benchmark scenario prior to the GST implementation in 2017-2018. Using own-price elasticity of demand for tobacco products, we estimate the impact of GST at the state level and the aggregate state-wise impact to obtain the national level impact. FINDINGS: We predict that the statutory GST rate of 28% plus compensation cess will increase the price of cigarettes, bidi and smokeless tobacco by 0.18%, 8.8% and 6%, respectively, and, as a result, it will reduce the weighted average consumption by 0.3%, 10% and 6% and increase tax revenue by 0.17%, 35% and 4.7%, respectively. Most states will experience a fall in tax revenue from tobacco products by more than 50% compared with the value-added tax revenue they collected pre-GST. The GST compensation cess will have to be used to compensate states' revenue shortfalls. CONCLUSIONS: The GST has increased the complexity of the tax system for tobacco products. In particular, for cigarettes, the specific cess constitutes the majority of tax revenue, and therefore, it must be revised regularly to protect revenue and keep real prices from falling. In addition, India should reintroduce excise taxation on all tobacco products, at least in part, on top of the GST, to make them less affordable and to smooth the transition after the expiration of the compensation cess.