Taxing To Reduce Risk

A new Briefing Paper from the Global State of Tobacco Harm Reduction (GSTHR), a project from UK-based public health agency Knowledge·Action·Change (K·A·C), urges governments around the world to encourage those who smoke to switch to safer nicotine products (SNP) by making use of their tax systems to ensure cigarettes are significantly more expensive than alternatives such as nicotine vapes (e-cigarettes) and heated tobacco products (HTP).

• GSTHR urges governments to use tax system to ensure cigarettes are significantly more expensive than safer nicotine products such as vapes and heated tobacco products
• Calls from groups like the World Health Organization to tax safer nicotine products at rates comparable to cigarettes could have devastating consequences for public health
• By 2023, excise taxes had been imposed on vapes in at least 54 countries and 33 US jurisdictions, and 66 countries had brought in excise taxes for heated tobacco products

GSTHR says taxation has long been regarded as one of the most effective tools by traditional tobacco control groups for controlling the consumption of combustible cigarettes. 

Tax on tobacco products is intended to serve two main purposes: to decrease demand by increasing prices, making these products less affordable and less appealing; and to generate government revenue.

Higher taxes on cigarettes have played a role in the falling smoking prevalence rates seen in many countries around the world, in part by encouraging those who smoke to transition to less harmful products like vaping. But this Briefing Paper, titled “Safer nicotine product taxation and optimal strategies for public health”, warns that calls from groups such as the World Health Organization, which has recommended taxing SNP, including HTP, at rates comparable to cigarettes could have devastating consequences for public health. Instead of quitting or switching to less harmful alternatives, consumers may continue or even return to smoking.

Written by GSTHR Economist Giorgi Mzhavanadze, this Briefing Paper focuses on nicotine vapes and HTP as they are the two dominant SNP categories with the most extensive data available, but the conclusions drawn may apply to other products such as snus or nicotine pouches. As well as examining the current global situation regarding the taxation of SNP, and how this relates to product accessibility, the Briefing Paper offers evidence-based policy recommendations for optimal taxation strategies in the support of harm reduction goals.

Looking around the world, the paper reveals that by 2023, among those nations that permit the sale of vapes, at least 54 countries and 33 US jurisdictions had brought in excise taxes on these products (based on available data). Excise tax burdens, defined as the share of the retail price attributable to excise taxes, show significant variation across the globe for vapes. Focusing on those countries that have introduced legislation, Belarus led with an exceptionally high tax burden of 88%, followed by Portugal at 85% and Norway at 78%, while at the other end of the spectrum, countries such as Costa Rica and Paraguay impose much lower burdens, at just 4% each, while Kenya levies 3%.

Several European countries, including the Netherlands, Austria, Belgium, Croatia, Luxembourg, Slovakia, Spain, France, the Czech Republic, Malta, Ireland and the United Kingdom, had not levied excise taxes on vaping products as of 2023, effectively maintaining a zero percent rate. However, more and more countries are implementing or planning to introduce excise duties on these products.

By 2023, at least 66 countries had implemented excise taxes on HTP. Palestine imposes a tax burden of 79%, followed by Israel at 75%, South Korea at 58%, and Japan at 55%, while in Finland and Andorra, there were excise taxes on HTP of 3% and 2%, respectively.

But this Briefing Paper finds that while SNP are generally taxed more favourably than cigarettes, these differences in tax rates do not always translate into significant price differences between cigarettes and SNP. Research suggests that tax advantages often benefit producers rather than consumers due to the industry’s pricing strategies. Instead of reducing prices to encourage a transition from smoking to safer products, companies leverage these tax benefits to maintain higher profit margins.

The latest GSTHR publication urges that all countries, even those where cigarette taxes represent a significant revenue source, should prioritise harm reduction. The long-term public health and economic benefits of reducing smoking, such as lower healthcare costs, far outweigh the potential short-term losses of excise tax revenue. It suggests innovative measures such as subsidising SNP for those who smoke should be considered, as, by lowering financial barriers, subsidies could play a critical role in accelerating the adoption of SNP. And the Briefing Paper concludes that this kind of innovative policy, together with optimal SNP taxation, offers significant opportunities to improve public health outcomes and achieve substantial economic gains over time.

Giorgi Mzhavanadze, GSTHR Economist, and author of this Briefing Paper, said: “Tax has played an important role in many countries in helping reduce smoking rates. By using informed and evidence-based approaches to differentiate between combustible, hazardous tobacco products and much safer nicotine products there is a potential to hasten the demise of smoking and improve public health, benefiting individuals and communities.”

References:

• Safer nicotine products taxation and optimal strategies for public health - https://gsthr.org/resources/briefing-papers/safer-nicotine-product-taxation-and-optimal-strategies-for-public-health/

Photo Credit:

• Money photo by Alexander Grey on Unsplash

Dave Cross

Journalist at POTV

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Dave is a freelance writer; with articles on music, motorbikes, football, pop-science, vaping and tobacco harm reduction in Sounds, Melody Maker, UBG, AWoL, Bike, When Saturday Comes, Vape News Magazine, and syndicated across the Johnston Press group. He was published in an anthology of “Greatest Football Writing”, but still believes this was a mistake. Dave contributes sketches to comedy shows and used to co-host a radio sketch show. He’s worked with numerous start-ups to develop content for their websites.