|| Appendix: Curbing
Tobacco Taxation: A View From The International Monetary Fund
INCREASES in tobacco excise rates are often included as a
component of Fund-supported stabilization programs for countries that need to mobilize
additional tax revenue to reduce the fiscal deficit. While excise rates on tobacco
products may be increased primarily to raise revenue, there are also health benefits from
reduced tobacco consumption.
In setting tobacco tax rates, governments need to take into
account several factors, including the impact of smuggling, cross-border shopping, and
duty-free purchases on ferries and planes. It is in the interest of governments to reduce
tobacco smuggling not only to increase excise revenues but also to limit the loss of
revenues from other taxes, including income and value-added taxes, as underground
transactions replace legal ones. Ultimately, tobacco excise tax rates must reflect the
purchasing power of the local consumers, rates in neighboring countries, and, above all,
the ability and willingness of the tax authority to enforce compliance.
With respect to the structure of tobacco excises, countries
should tax all types of tobacco-cigarettes, cigars, pipe tobacco, snuff or chewing
tobacco, and hand-rolling tobacco. The best international practice is to impose excises on
the destination basis under which imports are taxed and exports are freed of tax.
Excises can be either specific taxes (based on quantity) or
ad valorem (based on value). If a primary purpose of the excise is to discourage tobacco
consumption, a strong case can be made for specific excises that would impose the same tax
per stick. Specific taxes also are easier to administer because it is only necessary to
determine the physical quantity of the product taxed, and not necessary to determine its
value. Ad valorem taxes, however, may keep pace with inflation better than specific taxes,
even specific taxes that are adjusted fairly frequently.
The administration of domestic tobacco excises requires an
integrated strategy for taxpayer registration; filing and payment; collection of overdue
taxes; audit; and taxpayer services. Developing and transition countries may need to treat
tobacco production facilities as extraterritorial and administer excises similar to
customs duties. The tax authority would control shipments into and out of the production
Excise stamps can assist in ensuring the payment of excises
and ensuring that goods that have paid the tax appropriate for one jurisdiction are not
shipped to another. Introduction of stamps, however, involves considerable costs for
producers of excised goods. Stamps will serve little purpose in control unless their
utilization is monitored at the retail level.
SOME of these background papers will be published
in a forthcoming book by Oxford University Press titled Tobacco Control Policies in
Developing Countries, edited by Prabhat Jha and Frank Chaloupka.
Bobak, Martin, Prabhat Jha, Son Nguyen,
and Martin Jarvis. Poverty and Tobacco.
Chaloupka, Frank, Tei-Wei Hu, Kenneth E. Warner, Rowena van
der Merwe, and Ayda Yurekli. Taxation of Tobacco Products.
Gajalakshmi, C.K., Prabhat Jha, Son Nguyen, and Ayda Yurekli.
Patterns of Tobacco Use, and Health Consequences.
Jha, Prabhat, Phillip Musgrove, and Frank Chaloupka. Is There
a Rationale for Government Intervention?
Jha, Prabhat, Fred Paccaud, Ayda Yurekli, and Son Nguyen.
Strategic Priori-ties for Governments and Development Agencies in Tobacco Control.
Joossens, Luk, David Merriman, Ayda Yurekli, and Frank
Chaloupka. Issues in Tobacco Smuggling.
Kenkel, Donald, Likwang Chen, Teh-Wei Hu, and Lisa Bero.
Consumer Information and Tobacco Use.
Lightwood, James, David Collins, Helen Lapsley, Thomas
Novotny, Helmut Geist, and Rowena van der Merwe. Counting the Costs of Tobacco Use.
Merriman, David, Ayda Yurekli, and Frank Chaloupka. How Big
Is the World-wide Cigarette Smuggling Problem?.
Novotny, Thomas E., Jillian C. Cohen, and David Sweanor.
Smoking Cessation, Nicotine Replacement Therapy, and the Role of Government in Sup-porting
Peck, Richard, Frank Chaloupka, Prabhat Jha, and James
Lightwood. Cost-Benefit Analysis of Tobacco Consumption.
Ranson, Kent, Prabhat Jha, Frank Chaloupka, and Ayda Yurekli.
Effectiveness and Cost-effectiveness of Price Increases and Other Tobacco Control Policy
Saffer, Henry. The Control of Tobacco Advertising and
Sunley, Emil M., Ayda Yurekli, and Frank Chaloupka. The
Design, Administration, and Potential Revenue of Tobacco Excises: A Guide for Developing
and Transition Countries.
Taylor, Allyn L., Frank Chaloupka, Emmanuel Guindon, and
Michaelyn Corbett. Trade Liberalization and Tobacco Consumption.
Van der Merwe, Rowena, Fred Gale, Thomas Capehart, and Ping
Zhang. The Supply-side Effects of Tobacco Control Policies.
Woollery, Trevor, Samira Asma, Frank Chaloupka, and Thomas E.
Novotny. Other Measures to Reduce the Demand for Tobacco Products.
Yurekli, Ayda, Son Nguyen, Frank Chaloupka, and Prabhat Jha.
THIS report benefited greatly from ideas, technical
inputs, and critical review from a broad range of individuals and organizations.
Contributions to specific chapters are acknowledged in the Bibliographical Note. Reviewers
for the background papers or the summary report are noted below. In addition, valuable
input was provided by a series of consultations.
A. Reviewers for Background Papers or the Summary Report
Iraj Abedian, Samira Asma, Peter Anderson, Enis Baris, Howard
Barnum, Edith Brown-Weiss, Neil Collishaw, Michael Ericksen, Christine Godfrey, Robert
Goodland, Ramesh Govindaraj, Vernor Griese, Jack Henningfield, Chee-Ruey Hsieh, Teh-Wei
Hu, Gregory Ingram, Paul Isenman, Steven Jaffee, Dean Jamison, Michael Linddal, Alan
Lopez, Dorsati Madani, Will Manning, Jacob Meerman, Cyril Muller, Philip Musgrove, Richard
Peck, Richard Peto, Markku Pekurinen, John Ryan, David Sweanor, John Tauras, Joy Townsend,
Adam Wagstaff, Kenneth Warner, Trevor Woollery, Russell Wilkins, Witold Zatonski, Barbara
Zolty, and Mitch Zeller
1. Examination of Draft Report Outline and Key Economic
Issues August 27, 1997, at the 10th World Conference on Tobacco or Health, Beijing, China.
Supported by the World Bank. Chair: Thomas Novotny
Participants: Iraj Abedian, Frank Chaloupka, Simon Chapman,
Kishore Chaudhry, Neil Collishaw, Vera Luisa da Costa y Silva, Prakash Gupta, Laksmiati
Hanafiah, Natasha Herrera, Teh-Wei Hu, Desmond Johns, Prabhat Jha, Luk Joossens, Ken Kyle,
Eric LeGresley, Michelle Lobo, Judith Mackay, Patrick Masobe, Kathleen McCormally, Zofia
Mielecka-Kubien, Rafael Olganov, Alex Papilaya, Terry Pechacek, Milton Roemer, Ruth
Roemer, Lu Rushan, Cecilia Sepulveda, David Simpson, Paramita Sudharto, Joy Townsend,
Sharad Vaidya, Rowena Van Der Merwe, Kenneth Warner, Shaw Watanabe, David Zaridze, and
2. Initial Review of Outlines and Content of Background
Papers February 20, 1998, at the University of Cape Town's conference on "The
Eco-nomics of Tobacco: Toward an Optimal Policy Mix," Cape Town, South Af-rica.
Supported by the Institute of Social and Preventive Medicine at the University of
Lausanne, and the University of Cape Town.
Chair: Paul Isenman
Participants: Iraj Abedian, Judith Bale, Enis Baris, Frank
Chaloupka, David Collins, Neil Collishaw, Brian Easton, Helmut Geist, Chee-Ruey Hsieh,
Teh-Wei Hu, Prabhat Jha, Luk Joossens, Kamal Nayan Kabra, Pamphil Kweyuh, Helen Lapsley,
Judith Mackay, Eddie Maravanyika, Sergiusz Matusia, Tho-mas Novotny, Fred Paccaud, Richard
Peck, Krzysztof Przewozniak, Yussuf Saloojee, Conrad Shamlaye, Timothy Stamps, Krisela
Steyn, Frances Stillman, David Sweanor, Joy Townsend, Rowena Van Der Merwe, Kenneth
Warner, and Derek Yach
3. Economists' Technical Review Meeting
November 22-24, 1998, in Lausanne, Switzerland. Sponsored by
the Institute of Social and Preventive Medicine at the University of Lausanne, and the
Co-Chairs: Felix Gutzwiller and Fred Paccaud
Participants: Iraj Abedian, Nisha Arunatilleke, Martin Bobak,
Phyllida Brown, Frank Chaloupka, David Collins, Jacques Cornuz, Christina Czart, Nishan De
Mel, Jean-Pierre Gervasoni, Peter Heller, Tomasz Hermanowski, Alberto Holly, Teh-Wei Hu,
Paul Isenman, Dean Jamison, Prabhat Jha, Luk Joossens, Jim Lightwood, Helen Lapsley, David
Merriman, Phillip Musgrove, Son Nguyen, Richard Peck, Markku Pekurinen, Thomson Prentice,
Kent Ranson, Marie-France Raynault, John Ryan, Henry Saffer, David Sweanor, John Tauras,
Allyn.93 ACKNOWLEDGMENTS Taylor, Joy Townsend, Rowena van der Merwe, Kenneth Warner,
Trevor Woollery, and Ayda Yurekli
4. External Experts' Review
March 17, 1999, in Washington, D.C. Sponsored by the Office
on Smoking and Health, U.S. Centers for Disease Control and Prevention. Chair: Michael
Ericksen Participants: Iraj Abedian, Samira Asma, Judith Bale, Enis Baris, Phyllida Brown,
Frank Chaloupka, Peter Heller, Paul Isenman, Prabhat Jha, Nancy Kaufman, Thomas Loftus,
Judith Mackay, Caryn Miller, Rose Nathan, Son Nguyen, Fred Paccaud, Anthony So, Roberta
Walburn, Kenneth Warner, Trevor Woollery, Derek Yach, and Ayda Yurekli.
The World By Income And Region (World Bank Classification)
Grouped: East Asia and Pacific Europe and Central Asia
Latin America and the Caribbean Middle East and North Africa South Asia Sub- Saharan
Africa High- income OECD Other high income
East Asia and Pacific Cambodia China Lao PDR Mongolia Myanmar
Europe and Central Asia Armenia Azerbaijan Bosnia and
Herzegovina Kyrgyz Rep. Moldova Tajikistan
Latin America and the Caribbean Guyana Haiti Honduras
Middle East and North Africa Yemen, Rep.
South Asia Afghanistan Bangladesh Bhutan India Nepal Pakistan
Sri Lanka Rep.
Sub- Saharan Africa Angola Benin Burkina Faso Burundi
Cameroon Central African Chad Comoros Congo, Dem. Rep. Congo, Rep. Côte d'Ivoire
Equatorial Guinea Eritrea Ethiopia Gambia, The Ghana Guinea Guinea- Bissau Kenya Lesotho
Liberia Madagascar Malawi Mali Mauritania Mozambique Niger Nigeria Rwanda Sáo Tomé and
Principe Senegal Sierra Leone Somalia Sudan Tanzania Togo Uganda Zambia Zimbabwe
High- income OECD - none Other high income - none
Lower middle income
East Asia and Pacific Fiji Indonesia Kiribati Korea, Dem. Rep
Marshall Islands Micronesia Fed. Sts. Papua New Guinea Philippines Samoa Solomon Islands
Thailand Tonga Vanuatu
Europe and Central Asia Albania Belarus Bulgaria Estonia
Georgia Kazakstan Latvia Lithuania Macedonia Romania Russian Fed. Turkey Turkmenistan
Ukraine Uzbekistan Yugoslavia Fed Rep
Latin America and the Caribbean Belize Bolivia Colombia Costa
Rica Cuba Dominica Dominican Rep. Ecuador El Salvador Grenada Guatemala Jamaica Panama
Paraguay Peru St. Vincent and the Grenadines Suriname Venezuela
Middle East and North Africa Algeria Egypt, Arab Iran,
Islamic Rep Iraq Jordan Lebanon Morocco Syrian Arab Rep. Tunisia West Bank and Gaza
South Asia Maldives
Sub- Saharan Africa Botswana Cape Verde Djibouti Namimbia
High- income OECD - none Other high income - none
Upper middle income
East Asia and Pacific American Samoa Malaysia Palau
Europe and Central Asia Croatia Czech Rep. Hungary Isle of
Man Malta Poland Slovak Rep. Slovenia
Latin America and the Caribbean Antique and Barbuda Argentina
Barbados Brazil Chile Guadeloupe Mexico Puerto Rico St. Kitts and Nevis St. Lucia Trinidad
and Tobago Uruguay
Middle East and North Africa Bahrain Libya Oman Saudi Arabia
South Asia - none
Sub- Saharan Africa Gabon Mauritius Mayotte Seychelles South
High- income OECD - none Other high income - none
High- income OECD
Australia Austria Belgium Canada Denmark Finland France
Germany Greece Iceland Ireland Italy Japan Korea, Rep. Luxembourg Netherlands New Zealand
Norway Portugal Spain Sweden Switzerland United Kingdom United States
Other high income Andorra Aruba Bahamas, The Bermuda Brunei
Cayman Is. Channel Is. Cyprus Faeroe Is. French Guiana French Polynesia Greenland Guam
Hong Kong, China Israel Kuwait Liechtenstein Macao Martinique Monaco Netherlands Antilles
New Caledonia Northern Mariana Is. Qatar Reunion Singapore United Arab Emirates Virgin
Islands (U. S.)
Source: World Bank, 1998..101