Higher taxes on tobacco lowers consumption study

MANILA, Philippines – High taxes on tobacco products have lowered cigarette consumption among Asians, including Indonesians and Filipinos, according to a recent study commissioned by the Southeast Asia Tobacco Control Alliance (SEATCA).

The study, titled “The impact of higher cigarette taxes on Indonesian economy,” showed that high cigarette taxes have prevented cigarette smoking among Indonesians and increased government revenues.

SEATCA said the study led to findings “long observed in highly developed countries” that tobacco tax increase of 30 to 100 percent could raise cigarette prices by seven to 26 percent, thereby discouraging and reducing consumption by 2.6 to nine percent.

“And yet, 100, 50 or 30 percent tax increase will likely increase government revenue by 82.13 percent, 43.3 percent, and 24 percent respectively. Indonesia’s current tax rate is 31 percent,” SEATCA noted.

The study suggests that as people puff less cigarettes, they tend to spend more on necessary items for their health and welfare.

“A decline in tobacco consumption corresponds with a switch to expenditures on food items like meats, fish, eggs, milk, vegetables, and fruits and non-food items such as housing, goods and services, health and education.

“As a result, up to 60 non-tobacco related sectors achieved net gains on economic output, employment, and income,” the study added.

The study revealed that in contrast, cigarette production does not generate output, income, and employment as efficiently as other sectors.

“The contributions of cigarette manufacturing and tobacco farming to the national economy tend to be less than that of other sectors,” SEATCA said.

The cigarette industry and tobacco farming ranked 34th and 62nd, respectively, among the 66 economic sectors studied in Indonesia, contributing a mere 1.4 percent of its total gross domestic product (GDP) and one percent of the total national employment.

From 1970 to 2005, tobacco use in Indonesia had grown from 33 billion to 220 billion, posting an overall smoking prevalence rate of 34.4 percent.

Indonesia has not ratified the Framework Convention on Tobacco Control (FCTC) that was initiated by the World Health Organization (WHO) to regulate tobacco use worldwide.

SEATCA maintained that other ASEAN countries like the Philippines, Malaysia, Laos, Vietnam, and Cambodia “need to push their governments more to increase tobacco taxes.”

It added that tax hike is among the strategies recommended by WHO for FCTC signatories to adopt.

Other schemes to end smoking among people are warning them against the dangers of tobacco and enforcing the ban on tobacco advertising, promotions and sponsorships.