Taxation: Combating the myths spread by the tobacco industry

The tobacco industry is trying to block discussions on tax increases in many countries by using myths, false arguments or exaggerating the expected impact. For example:

• Myth #1: Raising tobacco taxes would lead to an increase in illicit trade

The factors that contribute to illicit trade are complex. However, contrary to the tobacco industry’s claims, taxes and prices have only a limited impact on illicit trade in these products. The market for illicit cigarettes is larger in countries with low taxes and prices, while it is relatively smaller in countries with higher taxes and cigarette prices[1]. Contraband cigarettes are cigarettes that leave the manufacturers’ factories but are taken outside the legal distribution channel to avoid taxes. Factors other than prices play a much more important role: a weak regulatory framework, the absence of controls, the existence of endemic corruption, etc.

Recommendations: Combating the illicit trade in tobacco products is an integral part of any policy to reduce tobacco consumption. Controlling the supply chain from manufacturing to retail and, in particular, providing for product monitoring and traceability to be entrusted to organisations that are directly and indirectly independent of the tobacco industry are essential measures. The protocol to combat the illicit trade in tobacco products has been ratified by France and the European Union. It entered into force in September 2018. This text provides for such a system as well as international cooperation and the strengthening of sanctions. The provisions currently in force with the European system do not comply with the required requirements, which requires a review of the current European directive on tobacco products.

• Myth #2: The tax increase would bring in a "jackpot" for the State

No. Contrary to popular belief, tobacco does not “bring money”, but rather incurs an extremely high cost to the community and to public finances. Indeed, even taking into account taxes, which as such do not create any wealth but are simple levies, as well as pensions not paid due to the premature death of smokers, the net cost of smoking in 2010 in France increases the amount of public deficits by 40 million Euros every day.[2].

Generally speaking, the damage caused by tobacco is not only borne by its consumers, but also by the rest of society, due to passive smoking, health costs, but also the worsening of environmental damage and the damage to sustainable development.

• Myth #3: Tobacco taxes would worsen social inequalities

In fact, since low-income people are more sensitive to price increases, increasing tobacco taxes reduces tobacco consumption more among this group.[3], with the ultimate consequence of improving the health of its members, while allowing them to reallocate the income thus available to other essential products or services: food, housing, education and health care.

Tobacco taxes are also particularly effective in preventing or reducing smoking among young people who generally do not have high incomes. A high price discourages them from starting or allows them to reduce or even stop their consumption.

Smoking is now a social marker because it is mainly the poorest who smoke. On the other hand, policies to combat smoking, particularly through tax increases, treatment coverage, etc., contribute greatly to reducing social inequalities in health.