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The Tax Man

Professor Frank Chaloupka is a Distinguished Professor of Economics at the University of Illinois at Chicago and Director of the World Health Organization (WHO) Collaborating Center on the Economics of Tobacco Control. He recently visited New Zealand to contribute to discussions about tobacco taxation policy.

 

Frank spoke at the recent ASPIRE2025 seminar at Otago University at the Wellington campus. Tobacco taxation is recognised as a core intervention for reducing smoking prevalence, and will almost certainly play a key role in the achievement of New Zealand’s Smokefree 2025 goal. There have been annual above inflation increases in tobacco taxation since 2010, but the last one is planned for next year, with no clarity about ‘what happens after 2016. Frank was asked to give his thoughts around tobacco taxation based on his years of experience in this arena. From his talk a number of key points were identified. 

  • New Zealand consumers are price sensitive and with every increase in tax, there is a predictable decrease in tobacco consumption.
  • Even though tax increases disproportionately affect  low income groups such as Māori and Pacific peoples, the evidence suggests that the economic benefits that low income people experience by quitting far outweigh the negative economic struggles that low income families experience for not quitting.
  • There is clear evidence to suggest that tagging a percentage of tobacco taxes to assist people to quit smoking is an effective strategy. It’s a politically acceptable initiative because the public view it as a user pays system.
  • In the US at least less regular tax increases with much larger increments may be a more effective strategy when compared to yearly small increases which allows the smoker to adapt to the smaller changes.
  • It should be noted that although tobacco tax is the most effective tool in the lowering the rates of smoking within any state or nation, a strategy to reduce smoking rates should not be based on tax increases alone. E.g Co-interventions or mass media likely to increase public health impact of tax increases.

Currently there is no indication that tobacco taxes will continue after 2016. This would be an ideal time to encourage community action and to demonstrate that communities would support further taxes on tobacco. We may even uncover that smokers themselves desire greater tax increases to force their hand into quitting.