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Economics of tobacco control (part 3): evidence from the ITC Project
  1. Corné van Walbeek1,
  2. Guillermo Paraje2
  1. 1 School of Economics, University of Cape Town, Rondebosch, South Africa
  2. 2 Business School, Universidad Adolfo Ibanez, Santiago de Chile, Chile
  1. Correspondence to Professor Corné van Walbeek, School of Economics, University of Cape Town, Rondebosch 7700, South Africa; cwalbeek{at}gmail.com

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Article 6 of the WHO Framework Convention on Tobacco Control (FCTC) urges Parties to use tax and price measures to reduce the demand for tobacco.1 Evidence of the effectiveness of using increases in the excise tax to reduce tobacco consumption was gathered during the 1980s and 1990s, slowly, and primarily US-focused at first, but more rapidly and increasingly internationally subsequently.2 Curbing the Epidemic,3 together with its companion piece, Tobacco Control in Developing Countries,4 collated the (limited) empirical evidence at the time and made very strong policy recommendations about the role of increasing the excise tax in reducing the consumption of tobacco and raising government revenue.

Whereas it was previously thought that public education and information campaigns were the most effective tobacco control mechanisms and that taxation was a minor and complementary measure, these publications turned this thinking on its head.2 Since the start of the 21st century, the evidence for the effectiveness of excise taxes as a means to reduce tobacco use has been indisputable. Hundreds of studies, many summarised in review publications like the IARC Handbook 145 and the National Cancer Institute’s Monograph 21 on the Economics of Tobacco Control, 6 provided strong evidence that tobacco tax increases are an important, even primary tool, in the tobacco control toolkit. The rallying cry of ‘raise the excise tax’ is made by economists and non-economists alike and is now considered mainstream thinking.

The effectiveness of an increase in the excise tax in reducing tobacco consumption can be undermined by a number of factors. A poor excise tax structure (eg, an ad valorem tax or a structure with multiple tax tiers, in contrast to a uniform specific tax) is often associated with a wide range of cigarette prices, which encourages smokers to substitute to …

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