Tobacco taxation

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Tobacco kills more than 7 million people every year. Armentieres vue cimetiere Cite Bonjean 2.jpg
Tobacco kills more than 7 million people every year.

Tobacco taxation is the excise tax on cigarettes and other tobacco products.

Contents

Tobacco taxation is the most effective tobacco control measure. [2] [3] It is used by many governments generate revue and to reduce tobacco consumption. [4] On average, a 10 % price increase reduces cigarette consumption by 4 % to 5 %. [5]

Its revenue can contribute to the general government budget and/or be used to cover health costs of tobacco smoking. The World Health Organization recommends a minimum 75 % tax share of the retail price of tobacco, as a way of deterring cancer, cardiovascular diseases and other negative health outcomes. [6] [7]

Impact

Substantial scientific evidence confirms that higher cigarette prices result in lower overall cigarette consumption (elasticity). Most studies indicate that a 10 % price increase reduces cigarette consumption by 4 % in developed countries and 5 % in developing countries. [5] [8] [9] Youth, minorities, and low-income smokers are two to three times more likely to quit or smoke less than other smokers in response to price increases. [10] [11]

The World Health Organization summarises: [2]

  1. A substantial body of research, which has accumulated over many decades and from many countries, shows that significantly increasing the excise tax and price of tobacco products is the single most consistently effective tool for reducing tobacco use.
  2. Significant increases in tobacco taxes and prices reduce tobacco use by leading some current users to quit, preventing potential users from initiating use, and reducing consumption among current users.
  3. Tobacco use by young people is generally more responsive to changes in taxes and prices of tobacco products than tobacco use by older people.
  4. Demand for tobacco products is at least as responsive and often more responsive to price in low- and middle-income countries as it is in high-income countries.

Research also shows that tobacco taxation can have a measurable impact on public health targets very fast, as early as within 4 months. [12]

Structure

The World Health Organization finds that: [13]

The structure of tobacco excise taxes varies considerably across countries, with lower income countries more likely to rely more on ad valorem excises and higher income countries more likely to rely more on specific excise taxes, while many countries at all income levels use a mix of specific and ad valorem excises.

Tobacco excise tax systems are quite complex in several countries, where different tax rates are applied based on prices, and product characteristics such as the presence/absence of a filter or length, packaging, weight, tobacco content, and/or production or sales volume. These complex systems are difficult to administer, create opportunities for tax avoidance, and are less effective from a public health perspective.

Globally, cigarette excise taxes account for less than 45 percent of cigarette prices, on average, while all taxes applied to cigarettes account for just over half of the price. Higher-income countries levy higher taxes on tobacco products, and these taxes account for a greater share of the price, with both the absolute tax and share of price accounted for by tax falling as country incomes fall.

In addition to taxes, other price policies include price promotion restrictions and minimum price laws. [3]

The tobacco industry respond to tax policies with sophisticated pricing tactics to maximise tobacco consumption and profits. [14] The strategies include differentially shifting taxes between products, changing product attributes or launching new products and sales promotion. [14]

By country

Taxes as a share of cigarette price, in 2014. Taxes-as-share-of-cigarette-price.png
Taxes as a share of cigarette price, in 2014.
Average price of a pack of 20 cigarettes, measured in international dollars, in 2014. Average-price-of-a-pack-of-cigarettes.png
Average price of a pack of 20 cigarettes, measured in international dollars, in 2014.

Australia

In Australia, total taxes account for 63% of the final price of a packet of cigarettes (2011 figures). These taxes include federal excise or customs duty and Goods and Services Tax. [17]

Austria

Finland

Germany

Iceland

Indonesia

Japan

Switzerland

United Kingdom

In the United Kingdom, as of April 2023, a packet of 20 cigarettes has a tax added of 16.5% of the retail price plus £5.89. [18] The UK has a significant black market for tobacco, and it has been estimated by the tobacco industry that 27% of cigarette and 68% of handrolling tobacco consumption is non-UK duty paid (NUKDP). [19]

United States

In 2002, the Centers for Disease Control and Prevention said that each pack of cigarettes[ quantify ] sold in the United States costs the nation more than $7 in medical care and lost productivity, [20] around $3400 per year per smoker. Another study by a team of health economists finds that the combined price paid by their families and society is about $41 per pack of cigarettes. [21]

In the United States, states are a primary determinant of the total tax rate on cigarettes. Generally, states that rely on tobacco as a significant farm product tend to tax cigarettes at a low rate. [22] Coupled with the federal cigarette tax of $1.01 per pack, cigarette-specific taxes range from $1.18 per pack in Missouri to $8.00 per pack in Silver Bay, New York.[ citation needed ] As part of the Family Smoking Prevention and Tobacco Control Act, the federal government collects user fees to fund Food and Drug Administration (FDA) regulatory measures over tobacco.

Cigarette taxes vary widely from state to state in the United States. For example, Missouri has a cigarette tax of only 17 cents per pack, the nation's lowest, while New York has the highest cigarette tax in the United States: $4.35 per pack. In Alabama, Illinois, Missouri, New York City, Tennessee, and Virginia, counties and cities may impose an additional limited tax on the price of cigarettes. [23] Sales taxes are also levied on tobacco products in most jurisdictions.

See also

References

  1. ↑ "WHO fact sheet: Tobacco". World Health Organization. 26 July 2013. Retrieved 3 October 2013.
  2. 1 2 "The Economics of Tobacco and Tobacco Control (NCI Tobacco Control Monograph Series 21)" (PDF). National Cancer Institute and World Health Organization. December 2016. Retrieved 19 December 2025. A substantial body of research, which has accumulated over many decades and from many countries, shows that significantly increasing the excise tax and price of tobacco products is the single most consistently effective tool for reducing tobacco use.
  3. 1 2 Golden, Shelley; Smith, Margaret Holt; Feighery, Ellen; Roeseler, April; Rogers, Todd; Ribisl, Kurt (1 July 2016). "Beyond excise taxes: a systematic review of literature on non-tax policy approaches to raising tobacco product prices". Tobacco Control . 25 (4): 377–385. doi:10.1136/tobaccocontrol-2015-052294. ISSN   0964-4563. PMC   4941206 . PMID   26391905.
  4. ↑ Robyn Burton; et al. (10 May 2024). "The relationship between the price and demand of alcohol, tobacco, unhealthy food, sugar-sweetened beverages, and gambling: an umbrella review of systematic reviews". BMC Public Health . doi: 10.1186/s12889-024-18599-3 . PMID   38730332 . Retrieved 19 December 2025.
  5. 1 2 "The Economics of Tobacco and Tobacco Control (NCI Tobacco Control Monograph Series 21)" (PDF). National Cancer Institute and World Health Organization. December 2016. Retrieved 19 December 2025. Thus, in HICs a 10% increase in the price of cigarettes may be expected to decrease tobacco consumption by 4%, while in LMICs a 10% increase in price may be expected to decrease consumption by 5%.
  6. ↑ "Promoting taxation on tobacco products". World Health Organization . Retrieved 19 December 2025.
  7. ↑ "Closing in on cancer". The Economist . Archived from the original on 23 September 2017. Retrieved 26 November 2025.
  8. ↑ Nargis, Nigar; Stoklosa, Michal; Shang, Ce; Drope, Jeffrey (January 2021). "Price, Income, and Affordability as the Determinants of Tobacco Consumption: A Practitioner's Guide to Tobacco Taxation". Nicotine & Tobacco Research. 23 (1): 40–47. doi:10.1093/ntr/ntaa134. PMC   7789936 . PMID   32697827.
  9. ↑ "Special Report: Higher Cigarette Taxes: Reduce Smoking, Save Lives, Save Money". Campaign for Tobacco-Free Kids. Archived from the original on 4 September 2009. Retrieved 26 November 2025.
  10. ↑ "Reducing Tobacco Use". Archived from the original on 21 February 2016. Retrieved 29 February 2016.
  11. ↑ Hyland, A.; Bauer, J. E.; Li, Q.; Abrams, S. M.; Higbee, C.; Peppone, L.; Cummings, K. M. (2005). "Higher cigarette prices influence cigarette purchase patterns". Tobacco Control. 14 (2): 86–92. doi:10.1136/tc.2004.008730. PMC   1748009 . PMID   15791017.
  12. ↑ Gauden Galea; et al. (May 2025). "Quick buys for prevention and control of noncommunicable diseases". The Lancet Regional Health. doi: 10.1016/j.lanepe.2025.101281 . PMID   40452915 . Retrieved 19 December 2025.
  13. ↑ "Global and regional overview of cigarette prices and taxation" (PDF). World Health Organization. Archived from the original (PDF) on 12 December 2019. Retrieved 15 January 2022.
  14. 1 2 Zaineb Danish Sheikh; Robert Branston; Anna Gilmore (9 August 2021). "Tobacco industry pricing strategies in response to excise tax policies: a systematic review". Tobacco Control . doi: 10.1136/tobaccocontrol-2021-056630 . PMID   34373285 . Retrieved 19 December 2025.
  15. ↑ "Taxes as a share of cigarette price". Our World in Data. Retrieved 5 March 2020.
  16. ↑ "Average price of a pack of cigarettes". Our World in Data. Retrieved 5 March 2020.
  17. ↑ Scollo, Michelle (2008). "13.2 Tobacco taxes in Australia" Archived 24 October 2022 at the Wayback Machine . Tobacco in Australia. Cancer Council Victoria. Retrieved 29 July 2010.
  18. ↑ "Tax on shopping and services". GOV.UK. Archived from the original on 24 November 2022. Retrieved 1 April 2023.
  19. ↑ "Tobacco Smuggling & Crossborder Shopping " Tobacco Manufacturers' Association". Archived from the original on 8 September 2008. Retrieved 29 February 2016.
  20. ↑ "Cigarettes Cost U.S. $7 Per Pack Sold, Study Says". The New York Times . 12 April 2002. Archived from the original on 13 February 2008. Retrieved 29 February 2016.
  21. ↑ "26, 2004-smoking-costs_x.htm Study: Cigarettes cost families, society $41 per pack". USA Today .
  22. ↑ "State Excise Tax Rates On Cigarettes (1 January 2007)". Taxadmin.org. Archived from the original on 9 November 2009. Retrieved 13 November 2009.
  23. ↑ Helen C. Alvarez (28 March 2014). "You and Cigarettes". Archived from the original on 4 March 2016. Retrieved 29 February 2016.
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