Harnessing the power of health taxesBMJ 2020; 369 doi: https://doi.org/10.1136/bmj.m1436 (Published 18 June 2020) Cite this as: BMJ 2020;369:m1436
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Taxing those who have poor access to education, housing and employment: public health or double penalty?
The pledge for health taxes as a “cost effective opportunity for progress in public health”(1) added little to Adam Smith’s observations: "Sugar, rum, and tobacco are commodities which are nowhere necessaries of life, which have become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation." (The Wealth of Nations, 1776).
Indeed, taxes are not a magic bullet and their use is most demanding:
a) Ad valorem taxes which are undershifted to consumer prices have little effect and must be combined with excise taxes;
b) taxes must be continuously and wisely adjusted for inflation rate and industrial strategies which are most effective to blunt effects of taxation.(2)
c) taxing is a strategy which cannot overlook the Laffer curve which illustrates the theoretical relationship between rates of taxation and resulting levels of government revenue. Simply, at 0% tax, revenue is zero, then it rises to a maximum rate of revenue at an intermediate rate of taxation, and then falls again to zero revenue at a 100% tax rate. However, in the real life setting, it is much more complex, and estimates are a challenge, the curve largely varies according to product (more flat when addictive like tobacco or essential like gazoline) and the marketing strategies of the industry (e.g. shifted manufacturer pricing and specific promotions).
Tax advocates should also be aware that:
a) when governments use taxes the first aim is not better health but a better revenue. Certainly Australia is a beacon for the prevalence of smoking, below 15%, but revenue from tobacco taxes increased from Aus$8.0 million in 2001 to Aus$10.4 in 2016 in Australia.(3) However, Australia, as all countries, avoided banning menthol or reducing nicotine content in cigarettes, the most simple but too rapid and effective measures.(4) Who could afford killing the goose that laid the golden eggs?(3) In France, for a long time, governments have been only sharing profits with the industry: no relevant increase in taxes (rare and always below 6%, a level inadequate to decrease sales) and even small increases in industrial prices from 2004 to 2017.(5) At this time, occurred a 15% increase in price targeting roll-your-own tobacco plus a ban on low price packs which represented 40% of sales but 32% of French adults smoked at least occasionally and 27% daily.
b) public health policies must be comprehensive. Cherry picking a measure precludes effectiveness. Taxes have little effectiveness when the most subtle marketing of the industry so easily by-passes regulations ignoring social media, not to account the ever growing cross-border trade on the Internet.
c) every intervention has drawbacks. This is obvious for tobacco use: smoking prevalence is highest among the most socially deprived. They are the ones who pay the tax and still smoke. Is this good public policy? Certainly tobacco taxes targeting the most deprived, too poor for income tax, allow them to actively participate in the budget. However, I am afraid that is not social justice.
1 Jain V, Baker P, Chalkidou K. Harnessing the power of health taxes. BMJ. 2020;369:m1436
2 Apollonio DE, Glantz SA. Tobacco Industry Promotions and Pricing After Tax Increases: An Analysis of Internal Industry Documents. Nicotine Tob Res. 2020;22(6):967-974. 3 Jain V, Baker P, Chalkidou K. Harnessing the power of health taxes. BMJ. 2020;369:m1436
3 Braillon A. Could Tobacco Control Policies Be a Smokescreen? JAMA Pediatr 2019. Online Nov 25. doi:10.1001/jamapediatrics.2019.4506.
4 Donny EC, Hatsukami DK, Benowitz NL, Sved AF, Tidey JW, Cassidy RN. Reduced nicotine product standards for combustible tobacco: building an empirical basis for effective regulation. Prev Med. 2014;68:17-22.
5 Braillon A. Tobacco Control Policies. Health Aff (Millwood) 2020;39:346.
Competing interests: AB, a senior tenured consultant, was illegally sacked, according to a ruling of Paris' Administrative Court, by the Ministry of Health in 2009, while his chief of department, Pr Gérard Dubois, was sued for libel by the tobacconists union (Witton J, O’Reilly J. Tobacco scientist wins case against illegal sacking. Addiction 2012;107:1714-5)