New Study on the Tobacconomics Cigarette Tax Scorecard in Relation to Tobacco Tax Revenues

Increasing tobacco excise taxes is an extremely effective tobacco control measure that can also serve as an important revenue source for governments. A large body of literature documents the effectiveness of higher tobacco taxes to decrease tobacco consumption, including mitigating initiation and encouraging cessation. Notably, there is still limited empirical evidence on the relationship between tobacco taxes and tobacco tax revenues, which is often a principal focus of tax policy makers.

A recent study, co-authored by Hye Myung Lee, Jeffrey Drope, Carlos M. Guerrero-López, and Frank J. Chaloupka from the Tobacconomics research team, and Anne-Marie Perucic from the World Health Organization (WHO), fills this gap in the literature by examining the relationship between the overall scores in the Tobacconomics Cigarette Tax Scorecard and tobacco excise tax revenues using data from 70 countries. This is the first study to analyze cigarette tax policies in relation to tobacco tax revenues at the global level. The results show a positive association between the overall scores and tobacco excise tax revenue per capita where the associations are particularly pronounced in low- and middle-income countries and lower taxation performing countries at baseline.

The findings from this study suggest that countries can generate more public-sector revenues by introducing or reforming cigarette tax policies. Another recent study “As Countries Improve Cigarette Tax Policy, Cigarette Consumption Declines” indicates that better tobacco tax policies can help countries achieve their public health goals by reducing tobacco consumption. Important components of successful tobacco taxation include adoption of a simple, uniform excise tax structure that relies more on specific taxes (i.e., taxing per unit such as a cigarette stick, not per value, which is more difficult to do effectively); and raising excise tax rates so that they comprise a larger proportion of price (70 percent is a widely-accepted minimum benchmark) and decrease affordability over time by significantly outpacing both inflation and economic growth. These findings altogether suggest that countries would be able to reduce tobacco use and increase their tobacco tax revenue. Tobacco taxes are underutilized globally along with other health taxes (e.g., excise taxes on alcohol and unhealthy foods) even though they could help governments and society broadly if these tobacco tax revenues were allocated to programs to help low-income smokers to quit and higher development priorities, including health and education.