What the Philippines can teach us about tobacco taxation

Tobacco kills half of its users. What if I told you that the most effective tool to reduce tobacco use can also generate millions annually in domestic revenue? It is low-cost and could save countries billions in healthcare costs. Yet, only 10% of the world’s population is sufficiently covered by this win-win public health policy.

The tool is tobacco tax – implemented so that it raises the cost and reduces affordability of tobacco products.   When enacted at the WHO-recommended level of 70% of cigarette pack price, tobacco tax has proven time and again to significantly reduce consumption of tobacco, and to be particularly effective in reducing smoking among youth. It has also been proven, as we are seeing in the Philippines, to reduce the number of smokers and raise incredible amounts of domestic revenue that can be reinvested in health.

 “Raising taxes on tobacco products is one of the most effective – and cost-effective – ways to reduce consumption of products that kill, while also generating substantial revenue.”  Dr. Margaret Chan, Director-General, WHO 

Today, the World Health Organization released its Report on the Global Tobacco Epidemic-2015, which highlights the important work in countries around the world to implement tobacco control policy. Since 2007, the number of people effectively covered by the strongest, evidence-based tobacco control policies has nearly tripled to 2.8 billion; yet, despite how impactful and cost-effective tobacco tax is, the report shows that it is the least implemented tobacco control policy globally. The new report calls attention to the fact that only 9% of low- and middle-income countries implement sufficiently high taxes on tobacco.

In the Philippines, we are seeing the positive and dramatic impact a significant increase in tobacco tax can cause. In 2013, the government enacted a landmark law that increased taxes on tobacco by up to 820 percent. After just one year of implementation, the government earned US $980 million in new tobacco tax revenue – far exceeding projections. More importantly, the health impacts are also apparent – a 2014 survey showed that overall smoking in the Philippines had decreased, with the largest declines among 18-24 year olds (17 percentage point decline) and the very poor (13 percentage point decline).[1]  The new tax revenue paid for health insurance premiums for about 14.7 million poor families in 2014.

We are excited by the momentum around tobacco tax reform here and in other countries, which has been supported by our expert partners in local and global organizations like the WHO, the Southeast Asia Tobacco Control Alliance (SEATCA), the World Bank, and the University of Cape Town, who provide evidence on the efficacy of tax policies, and advise on improving country tax systems, and partners like the Campaign for Tobacco-Free Kids that focus on bringing evidence to action.

The WHO report calls attention to this underutilized public health tool and highlights the impressive progress made thus far. If implemented properly, tobacco taxation could raise billions of dollars in government revenue and save millions of lives.

This article is published in collaboration with The Bill & Melinda Gates Foundation. Publication does not imply endorsement of views by the World Economic Forum.

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Authors: Jean Paullin is a Program Officer for the Tobacco initiative at the Bill & Melinda Gates Foundation. Amy Jerrett is an Associate Program Officer with the Program Advocacy and Communications team at the Bill & Melinda Gates Foundation.

Image: A box with excluded non-standard cigarettes is seen at the Czech Republic-based subsidiary of cigarette-maker Philip Morris International Inc. in Kutna Hora, August 28, 2012. REUTERS/Petr Josek.