How to cut smoking in poor countries

1 June 2017:

The recipe to get people to quit is well-known. Why are so many governments ignoring it?

IN SOME rich countries ex-smokers now outnumber those who still puff on. But in many poor countries smoking is on the rise, particularly among men. In parts of Africa more than a third of men smoke. In some Asian countries men are as likely to smoke as they were in America 50 years ago, back when the idea that tobacco is deadly was still news. After high blood pressure, smoking is now the world’s second-biggest cause of ill health and early death. Recent estimates put the annual costs from illness and lost productivity at $1.4trn, or 1.8% of global GDP. Almost 40% of this falls on developing countries, which are least able to afford it.

As the success in rich countries shows, there is no mystery about how to get people to stop smoking: a combination of taxes and public-health education does the job. This makes the abysmal record in poor countries a grave failure of public policy. The good news is that, following recent research, it is one that has just become easier to put right.

Death and taxes

In poor countries the tax rate on cigarettes is typically below 50%—and in some zero. These rates may not curb smoking much, because tobacco companies, which are sometimes monopolies, can cut their profit margins on cheaper brands and raise them on luxury ones to offset their losses.

Poorer countries could raise taxes, but they don’t because they have relied on market studies paid for by tobacco companies. These suggest that high taxes on cigarettes cause a surge in smuggling and, perversely, reduce overall tax revenues. Now, independent studies by the World Bank and others have shown that this conclusion is wrong. The black market is not as menacing as it seems and the revenues raised by higher cigarette taxes can help suppress it.

A growing number of countries, including the Philippines, Brazil, Turkey and Uruguay, are showing the way. The Philippines, for example, raised the tax on all types of cigarettes more than fourfold in 2012. As a result, prices of the cheapest brands, accounting for about two-thirds of all cigarettes, rose by more than 50%. In 2011-15 tobacco-tax revenues more than doubled, and the share of adults who smoked fell from 30% to 25%. By comparison, Britain took more than a decade to achieve the same change in smoking rates.

Crucially, some countries strengthened efforts to detect and curb smuggling at the same time. Black markets were often smaller than thought, with only 10-15% of all cigarettes sold illegally. When taxes went up, this share typically rose by just a few percentage points. In poorer countries tax evasion will be higher, but even then taxes will cut smoking and increase revenues if they are well administered.

The secret is to make the tax predictable and punitive. A uniform tax of, say, $1 a pack on all brands helps governments monitor compliance and predict tax revenues. As a rule, the World Health Organisation says, taxes should be at least 75% of the retail price of the most popular brand of cigarettes and rise with inflation and income growth.

The other step is to crack down on smuggling and tax evasion. Tax stamps that are difficult to counterfeit are a good start. Brazil, the Philippines and Turkey print encrypted codes on stamps in invisible ink. Kenya fits tobacco lorries with devices that transmit their routes to the authorities, helping them keep tabs on the merchandise. How to pay for extra law enforcement? Globally, tobacco-tax revenues are about $270bn a year, but less than $1bn of that is spent on anti-smoking policies. It is time for governments to help their citizens kick the habit—and earn some useful cash while they do it.

Source: http://www.economist.com/news/leaders/21722828-recipe-get-people-quit-well-known-why-are-so-many-governments-ignoring-it-how?frsc=dg%7Cc