The European Commission (Directorate General of Taxation and Customs Union (DG TAXUD)) published on its website a draft study on the measuring and reducing of administrative costs for economic operators and tax authorities and obtaining, in parallel, a higher level of compliance and security in imposing excise duties on tobacco products (RAMBOLL report). EPHA takes the opportunity to put forward recommendations on tobacco taxation.
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Tobacco in a few figures
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700,000 deaths per year [[in the EU Impact Assessment accompanying the Proposal for a Directive of the European Parliament and of the Council on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products. European Commission December 2012. http://ec.europa.eu/health/tobacco/docs/com_2012_788_ia_en.pdf]],
13 million people suffering from the main tobacco-related diseases [[http://europa.eu/rapid/press-release_MEMO-11-349_en.htm?locale=en#footnote-1footnote-1]],
Tobacco is the main risk factor of several serious diseases such as cancer [[After circulatory diseases, cancer was the second most common cause of death in 2006, accounting for two out of ten deaths in women and three out of ten deaths in men, equating to approximately 3.2 million EU citizens diagnosed with cancer each year.]]; cardiovascular diseases [[Each year cardiovascular disease (CVD) causes over 4 million deaths in Europe and over 1.9 million deaths in the European Union (EU). CVD causes 47% of all deaths in Europe and 40% in the EU.]]; respiratory diseases like chronic obstructive pulmonary disease (COPD) [[The primary cause of COPD is tobacco smoke (through tobacco use or second-hand smoke). In Europe 4-10% of adults have COPD. The total COPD related expenses for outpatient care (= not in hospital) in the EU is approximately €4.7 billion per year Inpatient care (=in hospital) generates costs of €2.9 billion followed by expenses in pharmaceutical of €2.7 billion per year.]].
Across the European Union, there are threefold differences in cigarette prices and in smoking prevalence. The higher smoking prevalence is clearly related to lower tobacco prices. [[Pricing Policies and Control of Tobacco in Europe (PPACTE) Policy Recommendations for Tobacco Taxation in the European Union Integrated Research findings from the PPACTE project. February 2009 – March 2012. P. 119]]
In 2012, 28% of all EU citizens smoked, 29% of people aged 15-24 [[Attitudes of Europeans towards tobacco”, Special Eurobarometer 385, March 2012]],
A total of €25.3 billion spent every year on healthcare in Europe [[James Reilly, Minister of Health intervention, ENVI public hearing on the Tobacco Products Directive, 25 February 2013]],
€8.3 billion of annual productivity loss [[James Reilly, Minister of Health intervention, ENVI public hearing on the Tobacco Products Directive, 25 February 2013]],
75% of the EU population in favour of stricter tobacco measures , which measures could include tobacco taxation. [[Eurobarometer Tobacco, Special Eurobarometer 332, 2010]]
Overall, 79% of nonsmokers and 49% of current smokers supported a price increase of 5%, with revenues allocated to support smoking cessation measures; 74% of non-smokers and 40% of smokers supported a 20% increase in price; and 76% of non-smokers and 67% of smokers perceived the provision of free smoking cessation support to be useful for controlling smoking. [[Pricing Policies and Control of Tobacco in Europe (PPACTE) Policy Recommendations for Tobacco Taxation in the European Union Integrated Research findings from the PPACTE project. February 2009 – March 2012. P. 120]]
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Health consequences and costs should be taken into account in future policy decisions on tobacco taxation
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Taxation of tobacco products is an important means of tobacco control under European Union competence and it is inextricably linked to public health. Price is a key determinant of demand for cigarettes. EPHA is very disappointed that consideration of the health consequences of tobacco, and the contribution that taxation can make to reducing death and disease from tobacco use, was completely missing from the RAMBOLL report. This is in contradiction to both the primary and secondary law applicable to tobacco taxation, and it omits the huge economic and financial burden tobacco consumption related health costs put on European societies. With regard to its missing health dimension, we have serious doubts if this report could be the basis of the Commission’s reporting obligation based on Article 19 of Directive 2011/64/EU. Therefore, EPHA strongly recommends that health aspects be taken into consideration before adopting the final report.
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Increasing tobacco taxes is an efficient way to fight the tobacco epidemic
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Tobacco taxes can generate revenues for governments, but they also provide a means to increase the price of tobacco products, dissuade consumption and thereby improve public health. The European Union and Member States shall continue to increase tobacco taxes to reduce the prevalence of smoking. It would be appropriate to use at least some of the tax revenue generated to support cessation, public education and other smoking prevention measures.
<img7388|left> According to WHO, raising tobacco taxes to increase prices by 10% is estimated to reduce tobacco use by 4% in high-income countries and by around 5% in low- and middle-income countries.
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Illicit tobacco trade, tobacco taxation and public health
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Illicit trade represents a serious threat to tobacco tax policy, government revenue and public health. Tobacco tax avoidance and evasion undermine the effectiveness of tobacco taxation by providing access to cheaper tobacco products, and they weaken the impact of other tobacco control policies and increase health disparities, while reducing government revenues. Simplifying the tax structure will help reduce opportunities for tax avoidance as well as monitoring costs per unit of revenue raised.
Tobacco tax avoidance and evasion undermine the effectiveness of tobacco taxation by providing access to cheaper tobacco products, and they weaken the impact of other tobacco control policies and increase health disparities, while reducing government revenues. [[International Agency for Research on Cancer. Effectiveness of tax and price policies in tobacco control. Lyon, 2011 (IARC Handbooks of Cancer Prevention, Tobacco Control, Vol 14). and West R, Townsend J, Joossens L, et al. Why combating tobacco smuggling is a priority. BMJ, 2008, 337:a1933. Referr referred in PPACTE project February 2009 – March 2012. P.76]] According to WHO, tax avoidance activities, by both consumers and producers, constrain governments’ ability to raise revenue and control consumption through taxation. Simplifying the tax structure will help reduce opportunities for tax avoidance as well as monitoring costs per unit of revenue raised. Tax evasion involves both illicit trade and illicit production; it may involve genuine products or counterfeit. High tax increases may provide financial incentives for smuggling, when enforcement and tax laws are weak, penalties are small, and it takes a long time to prosecute smugglers. Up-to-date technologies and a coordinated action including international collaboration, strengthened administration and enforcement with swift penalties are required. [[WHO technical manual on tobacco tax administration http://www.who.int/tobacco/publications/tax_administration/en/]]
Twenty months after the adoption of the WHO Framework Convention on Tobacco Control (FCTC) Protocol to eliminate Illicit Trade in Tobacco Products in November 2012, nor the EU or any EU Member State has ratified the protocol. EPHA recommends the urgent ratification of the protocol by the EU and the 28 Member States.
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Tobacco taxation and health inequalities
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There is considerable evidence that tobacco taxes are one of the most efficient policy instruments for reducing tobacco consumption and the associated health harms. A particular concern is the low taxes for RYO tobacco. In the period 2002-2013, sales for RYO tobacco in the EU have increased by 77% as result of the low level of taxes. EPHA recommends a move to a tobacco tax structure that makes trading down to cheap tobacco products less attractive. Urgent action should be taken to narrow the price differentials between the most expensive and the cheapest tobacco products and to prevent the industry from price-discounting the cheapest brands, cross-subsidising this practice with profits from more expensive brands. Selling cigarettes below cost and low price-based marketing, including selling below the tax level, should be banned.
Groups with lower socioeconomic status, lower incomes or lower educational attainment tend to have a higher prevalence of cigarette smoking. As a consequence, the burden of smoking-related ill health and mortality (including lung cancer, ischaemic heart disease and chronic obstructive pulmonary disease (COPD)) is increasingly concentrated in these groups. Smoking is a serious addiction, cessation is difficult for many, and support should be offered, particularly to smokers in low-income groups.
Smokers of low socio-economic status who continue to smoke after increases in tobacco taxes allocate a greater percentage of their income to satisfying their habit than richer smokers. If more smokers in lower socio-economic groups were to quit smoking as a result of increases in tobacco taxes then there would be a reduction in income and health disparities
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Tobacco industry involvement in tobacco taxation policy
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EPHA recommends that European Union institutions and Member States take action to ensure that tobacco taxation policies are developed without tobacco industry involvement, in conformity with Article 5.3 of the WHO FCTC. Monitoring and tracking and tracing should be implemented independently of the tobacco industry.
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Collection of Member States’ data on tobacco taxation
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EPHA recommends that all Member States be required to collect data and make it public, to allow monitoring and analysis of tobacco taxation and smoking prevalence.
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EPHA Recommendations on Tobacco Taxation (1 page summary) <img7253|center>
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– FULL EPHA Recommendations on Tobacco Taxation (pdf)
(source of the photos © WHO)
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EPHA related articles
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