Curbing the Epidemic Governments and the Economics of Tobacco Control

The Economics of Tobacco Control

the World Bank’s role in the global partnership

Joy de BeyerTobacco Control Coordinator, World Bank

The United Nations Ad Hoc Interagency Task Force

on Tobacco Control

UN Agencies:FAO, ICLA, ILO, IMF, UNAIDS, UNDCP, UNDP, UNDG, UNEP, UNICEF, UNESCO,

UNFPA, UN Secretariat, World Bank, WHO, WIPO

Some other key partners: CDC– the US Centers for Disease Control and

Prevention, Office of Smoking and Health

IDRC - International Development Research Centre (of Canada)

USDA - United States Department of Agriculture The UN Foundation

Curbing the EpidemicGovernments and the Economics of Tobacco Control

The World Bank

The bottom line:

Modest action by governments could save millions of lives and

prevent much disease, including -perhaps especially- among poor people, without long-term harm

to most economies.

Change will be slow.

Factors that increase or maintain tobacco use

rising incomes population growth nicotine addiction consumer choiceadvertising and promotion

The global tobacco market will not just “wither away”.

Global Cigarette Consumption by Country Income Groups

0

500000

1000000

1500000

2000000

2500000

HI UMI LMI LI

Mill

ion

piec

es

1996

1997

1998

1999

Cigarette price and consumption go in opposite trends

Real price of cigarettes and annual per adult cigarette consumption in South Africa 1970-1989

0.05

0.06

0.07

0.08

0.09

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988

Year

Cig

are

tte c

on

su

mp

tio

n p

er

ad

ult

(in

packs)

0.7

0.8

0.9

1

1.1

1.2

1.3

Real

Pri

ce

Real price

Consumptionper adult

Trends Between Real Cigarette Price and Consumption in Argentina

1989-1995

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.4019

89

1990

1991

1992

1993

1994

1995

Rea

l pric

e/pa

ck

48

50

52

54

56

58

60

62

Pack

of

Con

sum

ptio

n/ca

pita

Real Price Consumption/capita

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

High Income Upper MiddleIncome

Lower MiddleIncome

Low Income

Countries by income

Ave

rage

pri

ce o

r ta

x pe

r pa

ck (U

S$)

0

10

20

30

40

50

60

70

80

Tax

as a

per

cent

age

of p

rice

Average price in US$Average tax in US$Tax as a percentage of price

Source: Authors’ calculations

Cigarette tax levels are lower in low or middle-income countriesCigarette tax levels are lower in low or middle-income countries

Smuggling is a big problem.

High taxes and price differentials provide an incentive to smuggle,

but other factors are important, e.g corruption

Coordinated multilateral tax increases are best

Action against smuggling is a priority

Tobacco smuggling tends to rise in line with the degree of corruption

Smuggling as a function of transparency index

Tobacco smuggling tends to rise in line with the degree of corruption

Smuggling as a function of transparency index

Brazil

Pakistan

Cambodia

Indonesia

Sweden

Austria

y = - 0.02x + 0.2174

R2 = 0.2723

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0 2 4 6 8 10

Transparency index for country

Sm

ug

gli

ng

as a

sh

are o

f c

on

su

mp

tio

n (

%)

Source: Merriman and others, background paper

Per Capita Monthly Tobacco Expenditures by Income Groups in Indonesia,

1981-1996

210

1598

3616

5193

1278

591

0

1000

2000

3000

4000

5000

6000

Poor middle high

Rub

iah/

capi

ta

198119841987199019931997

Per Capita Monthly Tobacco Expenditures by Income Groups in Indonesia,

1981-1996

210

1598

3616

5193

1278

591

0

1000

2000

3000

4000

5000

6000

Poor middle high

Rub

iah/

capi

ta

198119841987199019931997

Cigarette Tax Revenue and Consumption in Sweden, 1970-1998

0

1000

2000

3000

4000

5000

6000

7000

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

Mil

lio

n S

KE

0

10

20

30

40

50

60

70

80

pack/c

ap

ita

TaxesMillion SKE cigarette/pack

Trend in Cigarette Tax Revenues and Tax Rates in Sweden 1970-1998

0

1000

2000

3000

4000

5000

6000

7000

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

Mil

lio

n S

KE

(lo

cal

cu

rren

cy)

0

5

10

15

20

25

Tax/p

ack S

KE

(lo

cal

cu

rren

cy)

TaxesMillion SKE Taxes per pack

Indonesian Percentage of Current Smokers by Level of Education 1993

0

10

20

30

40

50

60

70

80

90

Noschooling

primary secondary high school university

% o

f mal

e &

fem

ale

smok

ers

0

5

10

15

20

25

30

35

40

45

% o

f tot

al s

mok

ers

Males

Females

Total

Governments, multilateral agencies, NGOs and citizens could together save millions of lives and improve health, by reducing use

of tobacco products.