Taxing Tobacco to Reduce Smoking

Health and Healthcare

Published: July 9, 2015 6:40 am

As smoking as dropped in developed countries, tobacco companies, which include Philip Morris International Inc. (NYSE: PM), have focused on developing countries and the third world. If the World Health Organization (WHO) has its way, increases in national tobacco taxes may curtail tobacco use around the world.

The WHO has released a reported titled “WHO Report on the Global Tobacco Epidemic 2015.” The argument made in the document is simple. Making people pay more for tobacco cuts use. And the WHO claims it can prove it.

The health organization report says some nations barely tax tobacco at all, but they should:

Too few governments levy appropriate levels of tax on cigarettes and other tobacco products. They therefore miss out on a proven, low-cost measure to curb demand for tobacco, save lives and generate funds for stronger health services

The number of countries that bother to tax tobacco at any substantial rate at all is too small to make a major dent in tobacco use in developing and third world nations:

The report focuses on raising taxes on tobacco. Although 33 countries impose taxes that represent more than 75% of the retail price of a packet of cigarettes, many countries have extremely low tax rates. Some have no special tax on tobacco products at all.

The report supposes that the countries have any substantial reason to cut tobacco use at all. What the WHO does not report is whether the political weight of smokers keeps governments from increasing taxes. And tobacco companies have a huge incentive to back that lack of high tolls.

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Still, the WHO prescriptions for cutting tobacco use are simplistic:

Monitor tobacco use and prevention policies;

Protect people from tobacco smoke;

Offer help to quit tobacco use;

Warn people about the dangers of tobacco;

Enforce bans on tobacco advertising, promotion and sponsorship; and

Raise taxes on tobacco.

As if people cannot figure out the reasons to stop tobacco use on their own.

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