Ángel López Nicolás Universidad de Cartagena

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. What are the main problems to be
tackled by tobacco tax policy in the
EU?

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. Combustion
• The bulk of the burden
of disease over the near
future will still come
from combustible
products

5. Cigarettes and RYO tobacco
• Cigarettes and RYO
tobacco are the most
frequently consumed
products within
combustible products

6. What are the main problems to
be tackled by tobacco tax policy?
Use of combustible tobacco
products: cigarettes and RYO tobacco

7. What factors (amenable by tax policy)
prevent further reductions in cigarettes
and RYO tobacco use in the EU?

8. Cigarettes
• The average price of a
pack of 20 cigarettes
has increased in real
terms
– 2004 (3.1 €)
– 2017 (4.5 €)

9. Cigarettes
• But price diferences
between countries have
remained almost
constant
• 2004 (IQR=2.7 €)
• 2017 (IQR=2.5 €)

12. CROSS BORDER PRICE DIFFERENTIALS UNDERMINE THE
EFFECTS OF TAX POLICIES
AND ALSO, THE LEVEL OF PROTECTION AFFORDED BY TAXATION DEPENDS ON
WHERE YOU LIVE

13. RYO tobacco
• In the case of RYO
tobacco, variability in
prices across Member
States has increased
since 2004

14. 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

15. 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

16. 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%

19. RYO TOBACCO PROVIDES A CHEAP ALTERNATIVE FOR PRICE
SENSITIVE CONSUMERS WHEN CIGARETTE PRICES INCREASE

20. 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

21. Taxes, which taxes?

22. 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

23. Taxes, which taxes?
Minimum tax per unit of product
Per (manufactured) cigarette
Per kilogram of RYO tobacco

25. LINK DOMESTIC TAX POLICIES TO EVOLUTION OF EU WIDE
PRICES
CLOSE PRICE GAP BETWEEN CIGARETTES AND RYO

26. A window of opportunity
Revision of the EU Tobacco Tax
Directive

27. 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

28. Effects of tax reform 1 on prices of RYO
tobacco

29. 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)

30. Effects of tax reform 2 on prices of
cigarettes

31. 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

32. 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