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Research on Tobacco Products Taxation for Global Tobacco Control

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Ángel López Nicolás
Universidad de Cartagena

Published in: Healthcare
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Research on Tobacco Products Taxation for Global Tobacco Control

  1. 1. ICO-WHO Symposium on Tobacco Control Bridging the gap between research and policies L´Hospitalet de LLobregat 3-12-2018 Research on tobacco products taxation for global tobacco control Ángel López Nicolás Universidad Politécnica de Cartagena
  2. 2. What are the main problems to be tackled by tobacco tax policy in the EU?
  3. 3. Combustion • Prevalence of combustible tobacco use still high in the EU – 2006: 31.7% • (125.5 M. out of 396 M. people) – 2017: 26.15% • (117.8 M. out of 431.5 M. people)
  4. 4. Combustion • The bulk of the burden of disease over the near future will still come from combustible products
  5. 5. Cigarettes and RYO tobacco • Cigarettes and RYO tobacco are the most frequently consumed products within combustible products
  6. 6. What are the main problems to be tackled by tobacco tax policy? Use of combustible tobacco products: cigarettes and RYO tobacco
  7. 7. What factors (amenable by tax policy) prevent further reductions in cigarettes and RYO tobacco use in the EU?
  8. 8. Cigarettes • The average price of a pack of 20 cigarettes has increased in real terms – 2004 (3.1 €) – 2017 (4.5 €)
  9. 9. Cigarettes • But price diferences between countries have remained almost constant • 2004 (IQR=2.7 €) • 2017 (IQR=2.5 €)
  10. 10. CROSS BORDER PRICE DIFFERENTIALS UNDERMINE THE EFFECTS OF TAX POLICIES AND ALSO, THE LEVEL OF PROTECTION AFFORDED BY TAXATION DEPENDS ON WHERE YOU LIVE
  11. 11. RYO tobacco • In the case of RYO tobacco, variability in prices across Member States has increased since 2004
  12. 12. What factors (amenable to tax policy) prevent further reductions in cigarettes and RYO tobacco use in the EU? Factor 1: Lack of product price convergence across countries
  13. 13. Cigarettes and RYO tobacco • The gap between the prices of cigarettes and RYO tobacco has widened since 2004 • By 2017 it was 2 € per 20 sticks
  14. 14. Changing patterns of consumtion • Not surprisingly, demand has shifted to the cheaper category • Cigarettes: sales down by 35.5% • RYO tobacco: sales up by 19%
  15. 15. RYO TOBACCO PROVIDES A CHEAP ALTERNATIVE FOR PRICE SENSITIVE CONSUMERS WHEN CIGARETTE PRICES INCREASE
  16. 16. What factors (amenable to tax policy) prevent further reductions in cigarettes and RYO tobacco use in the EU? Factor 2: Persistent price gap between cigarettes and RYO tobacco
  17. 17. Taxes, which taxes?
  18. 18. Excise tax floor • European Union tax legislation permites to generate an excise tax floor per unit of product • This excise tax floor explains almost perfectly the variation in retail prices
  19. 19. Taxes, which taxes? Minimum tax per unit of product Per (manufactured) cigarette Per kilogram of RYO tobacco
  20. 20. LINK DOMESTIC TAX POLICIES TO EVOLUTION OF EU WIDE PRICES CLOSE PRICE GAP BETWEEN CIGARETTES AND RYO
  21. 21. A window of opportunity Revision of the EU Tobacco Tax Directive
  22. 22. Tax reform 1 Equalizing the minimum tax between one cigarette and 0.7 grams of RYO tobacco Cigarettes: 90 € per 1000 units RYO tobacco: 128.5 € per kilogram
  23. 23. Effects of tax reform 1 on prices of RYO tobacco
  24. 24. Tax reform 2 Encourage the convergence of product prices across countries Set minimum tax per unit of product at 60% of European Weighted Average Price (EWAP)
  25. 25. Effects of tax reform 2 on prices of cigarettes
  26. 26. Conclusion: diagnosis • Main problem are cigarettes and RYO – But do not neglect e-cigarettes and heat not burn tobacco • Lack of price convergence – Cross border shopping undermining domestic public health and tax policies • Wide gap between prices of cigarettes and RYO – Trading down rather than quitting – Gateway for less affluent individuals at risk of starting
  27. 27. Conclusion: treatment • Boost role of minimum quantity taxes in new Tobacco Tax Directive – Reform 1: Equalize tax burden of cigarettes and RYO – Reform 2: Set minimum tax at 60% of European Weighted Average Price for both products • Member States may enhance these reforms by using greater minimum thresholds in their domestic policies

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