Effectiveness of tobacco tax in tobacco control: evidences from India

Abstract

Background Tobacco tax is proved to be the most important cost effective instrument of tobacco control. There are ample evidences suggesting the role of tax in reducing tobacco consumption. However, there are limited evidences regarding the effectiveness of tobacco tax in tobacco control in India. This study has been undertaken to address the current knowledge gap. The objectives are to: · examine tax structure, tax rates and price trends across tobacco products · estimate affordability of tobacco products due to rise in income · examine excise and total tax burden across tobacco products Methods This study used secondary data from Government publications: Annual Survey of Industry (ASI), Ministry of Finance, Labour bureau, during 2005-06 to 2015-16. It compared wholesale and retail price indices of tobacco products with the general price indices to estimate the relative price increase of tobacco products. Affordability was measured comparing rise in per capita income and inflation rate of tobacco products. For tax burden, the share of excise tax in the retail price was calculated. Results The relative Whole Sale price Index (WPI) of tobacco products showed increasing trend between 2005-05 and 2015-16. Across products, the relative WPI was lowest for bidi. Affordability of cigarette increased during 2005-06 to 2012-13 and declined during 2013-14 to 2015016. For bidi and chewing tobacco, affordability increased over the years. The excise tax burden was 40% for cigarette and was only 4% for bidi in 2015-16. Total tax burden on bidi and cigarette was 20% and was 59% respectively. Conclusions This study suggests to increase prices of all tobacco products to raise the excise burden comparable to the international standard to make it more effective from a tobacco control perspective. More importantly, the tax rate on bidi has to be substantially increased for which affordability is declining.

Keywords

• WCTOH