Study: Raising the price of tobacco is the effective way to reduce tobacco use

According to a recent report, raising the price of tobacco products through excise tax increases is the most effective way to reduce tobacco use in Turkey, which is a win-win situation for public health and government revenues.

The tobacco excise tax is calculated on an ad valorem basis. However, if the calculated tax falls below a minimum amount, a specific tax rate applies.

As of Jan. 1, 2010, the ad valorem tax is 63 percent of retail price. A specific tax of TL 2.65 is applied should the excise tax amount to less than that. A 15.25 percent of retail price value added tax (VAT) also applies. Tobacco excise taxes average 63.4 percent of the retail price, making the total tax (including VAT) average 78.7 percent of retail value.

“The Economics of Tobacco Control and Tobacco Taxation: Challenges and Opportunities for a Tobacco Free Turkey” report was publicized in Ankara yesterday.

“The Economics of Tobacco Control and Tobacco Taxation: Challenges and Opportunities for a Tobacco Free Turkey” report was publicized in Ankara yesterday.

“The 2010 tobacco tax will generate 15.5 billion TL in revenue and prevent 340,000 premature deaths among people living today. As current smokers quit, 165,000 lives will be saved. Among the youth, the increased tax will reduce smoking prevalence by 7 percent, as well as prevent almost 437,000 youth from starting to smoke and over 175,000 premature deaths among youths alive today,” stated the report, which was presented on Thursday at a press conference held in Ankara.

The report is part of an index of reports being financed by the Bloomberg Philanthropies and the Bill & Melinda Gates Foundation within the framework of the Bloomberg Initiative to Reduce Tobacco Use, which was established in 2005.

“The Economics of Tobacco Control and Tobacco Taxation: Challenges and Opportunities for a Tobacco Free Turkey” report was drafted by the World Health Organization (WHO) in coordination with the Turkish National Cigarette and Health Committee (SSUK), the finance and health ministries of Turkey and several universities based in Turkey and the United States.

“Increasing the ad valorem tax rate to 65 percent and the specific tax to 3.10 TL/pack would bring in an additional 1.3 billion TL in tax revenue, reduce youth smoking by an additional 3 percent, and prevent over 288,000 tobacco-related deaths among young people,” it says, while listing a number of recommendations for reducing tobacco use in Turkey.

“Increase the specific tax and adjust it automatically for inflation. Ensure prices increase faster than inflation. Increase excise taxes over time so that they account for at least 70 percent of retail cigarette prices. Raise revenues through tax increases rather than relying on cigarette manufacturers to increase their prices. Dedicate a portion of tobacco tax revenues to financing the health care system and supporting tobacco control programs; Just 10 percent of the excise tax revenue would pay for 5.6 percent of total public health expenditures. Strengthen ongoing efforts to curb illicit trade in tobacco products as reducing illicit trade will maximize the revenue and health impact of tax increases,” the report listed in its recommendations.

Ayda Yürekli, a senior economist of WHO and the coordinator of its Tobacco Control Economics Unit, is among authors of the report. Yürekli, speaking at the press conference, praised the Turkish government’s efforts in reducing tobacco use, while labeling the efforts in her home country as “the best practice,” offering a regional model.

Yürekli firmly ruled out well-known arguments which suggest that more taxes on tobacco products would lead to more tobacco smuggling into Turkey from neighboring countries and a consequent drop in the country’s tax revenues.

“So far, no country in the world has lost income from increasing the tax rate,” Yürekli said.

Figures within the report clearly reveal the potential loss Turkey will face in the event of it not intervening in tobacco use. By 2050, over 127,000 Turkish citizens will die prematurely from tobacco-related diseases each year, 6.4 million young people (15 years old and younger) will become smokers as adults and 2.57 million young people will die prematurely from tobacco-related diseases.


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