It’s easy to quit smoking if you hike excise taxes

The World Health Organization estimates that six million people die every year from smoking; for Italy, the Health Ministry puts that number in the range of 70,000 to 83,000. Here, we saw tobacco consumption drop after smoking was banned in public spaces (the Sirchia Law), to later start climbing again with the launch of electronic cigarettes and Heated Tobacco Products (HTP).

To discourage smoking, occasional calls are made to hike excise taxes on cigarettes and other tobacco products. But since such a move is unpopular, we need to make sure it would be effective. With this in mind, and along with our colleagues Michela Meregaglia, Laura Giudice and Simone Ghislandi from CeRGAS (Research Center on Health and Social Care Management), we reviewed the sizeable body of extant scientific literature in a study conducted for the non-profit Fondazione Umberto Veronesi ETS, which has been working on the topic for years.

Spoiler alert (but I want to make this clear upfront): Yes, raising taxes on tobacco can curb smoking. In fact, most of the scientific literature concurs that higher taxes mean lower demand for tobacco, lower tobacco consumption, and a lower percentage of tobacco users. Specifically, according to a recent meta-analysis covering all the scientific evidence produced so far, a 10% price increase can generate noticeable impacts, such as a 5.4% decline in tobacco demand, and a 1.3%/2.4% dip in the number of smokers, including young people. Put another way, if people have to pay €5.93 for a pack of cigarettes instead of €5.40, they’ll smoke one less cigarette per pack. What’s more, the consensus is growing that people will live longer, healthier lives. For example, in the US they’re finding a correlation between higher tobacco taxes and lower mortality rates, not only for cancer but across the board, even for infant mortality.

A deep dive into the scientific literature also reveals that some of the most common objections to tax hikes on tobacco simply don’t hold water. One is the concern that higher taxes will incentivize the illegal tobacco trade. But what actually happens is that illegal tobacco tends to follow legal tobacco as far as price trends. In other words, if the price of cigarettes climbs due to a rise in the excise tax, instead of trying to win a bigger market share, smugglers would rather earn more on the same quantity of goods sold. In some cases (specifically in Australia and Vietnam), the sale of illegal cigarettes has even decreased following an increase on excise taxes.

Another unfounded argument is that higher excise taxes penalize low-income individuals, exacerbating inequality. Instead, the opposite is true: these are the very people who get the biggest health benefits, because they cut back the most on their tobacco consumption.

The third objection is that tax hikes hurt tobacco growers and the economies of tobacco producing countries. Here too the scientific evidence produced by the World Bank tells us otherwise. For farmers, tobacco is one of the lowest-profit crops; it’s easy to automate and

entails significant environment risks. So even if taxation prompts farmers to switch to other crops, this wouldn’t be a bad thing.

Compared to other countries, today Italy is still lagging behind in tobacco taxation policies that have the clear aim of prevention and public health. The modest increments in excise taxes applied so far don’t modify people’s behavior; instead, they mainly serve to multiply tax revenues for the State. Italy’s excise taxes are below the European average: a pack of cigarettes here costs half the price compared to France, and a third compared to Ireland. So, we still have plenty of room to maneuver as far as interventions aimed at improving the health of the Italian population and saving lives.

Originally published in Fortune Italia