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Extended cost–benefit analysis of tobacco taxation in Brazil
  1. Jose Angelo Divino1,
  2. Philipp Ehrl1,
  3. Osvaldo Candido1,
  4. Marcos Aurelio Pereira Valadao2
  1. 1 Graduate Program of Economics, Catholic University of Brasilia, Brasilia, DF, Brazil
  2. 2 School of Public Policy and Government, Getulio Vargas Foundation, Brasilia, DF, Brazil
  1. Correspondence to Professor Jose Angelo Divino; jangelo{at}p.ucb.br

Abstract

Background Brazil has experienced a persistent and substantial reduction in the prevalence of smoking in the population since 2006 due to increased taxes on tobacco and other tobacco control policies. Despite the effectiveness of these measures, however, the socioeconomic costs of smoking are still very high. Tobacco taxation in Brazil plays an important role among the measures adopted to curb tobacco use.

Methods The study combines data from the National Household Sample Survey of 2008 and the National Health Survey of 2013 and applies cross-section, pooled, and probit estimations, to estimate price elasticities of tobacco consumption by distinct population cohorts. The paper presents a comprehensive cost–benefit analysis resulting from a one-time tax increase on manufactured cigarettes using estimated conditional price elasticity of cigarette consumption and probability of smoking by income and age quartiles.

Findings Each 10% price increase (BRL 0.54), due to higher tobacco taxes, reduces cigarette consumption by about 5%, and for poor smokers, it would lead to net income gains by about BRL 39.00 per month (in 2019 values). The highest net income effects were observed for the younger, aged between 15 and 29 years, and for middle-aged individuals, between 40 and 59 years old. Higher tobacco taxes lead to lower medical expenses on tobacco-related diseases and a longer, healthier and more productive life. Most importantly, this policy is progressive, as its economic effects are stronger for the poorer than for the richer according to the income quartiles.

Conclusions A tax increase that rises cigarette prices generates significant social benefits by reducing tobacco spending and medical expenses on tobacco-related diseases and raising future years of life and net income. The total benefits for the individual and the society go way beyond the public finance improvement.

  • taxation
  • economics
  • public policy
  • surveillance and monitoring
  • tobacco industry

Data availability statement

Data are available in a public, open access repository. The public data used in the paper are: (1) National Household Sample Survey (PNAD) de 2008, available at https://www.ibge.gov.br/estatisticas/sociais/educacao/9127-pesquisa-nacional-por-amostra-de-domicilios.html?edicao=9128&t=downloads (2) National Health Survey (PNS) de 2013, available at https://www.ibge.gov.br/estatisticas/sociais/saude/9160-pesquisa-nacional-de-saude.html?=&t=downloads (3) Risk Factor Surveillance and Protection for Chronic Diseases by Telephone Survey (VIGITEL), which is performed annually, available at http://svs.aids.gov.br/download/Vigitel/All these surveys are anonymized and fully opened to public access.

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Data availability statement

Data are available in a public, open access repository. The public data used in the paper are: (1) National Household Sample Survey (PNAD) de 2008, available at https://www.ibge.gov.br/estatisticas/sociais/educacao/9127-pesquisa-nacional-por-amostra-de-domicilios.html?edicao=9128&t=downloads (2) National Health Survey (PNS) de 2013, available at https://www.ibge.gov.br/estatisticas/sociais/saude/9160-pesquisa-nacional-de-saude.html?=&t=downloads (3) Risk Factor Surveillance and Protection for Chronic Diseases by Telephone Survey (VIGITEL), which is performed annually, available at http://svs.aids.gov.br/download/Vigitel/All these surveys are anonymized and fully opened to public access.

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Footnotes

  • Contributors All coauthors contributed to the research and paper drafting.

  • Funding This research (grant number 17409) is funded by the University of Illinois at Chicago’s (UIC) Institute for Health Research and Policy to conduct economic research on tobacco taxation in Brazil. UIC is a partner of the Bloomberg Initiative to Reduce Tobacco Use. The views expressed in this document cannot be attributed to, nor do they represent, the views of UIC, the Institute for Health Research and Policy, or Bloomberg Philanthropies.

  • Disclaimer The views expressed in this document cannot be attributed to, nor do they represent, the views of UIC, the Institute for Health Research and Policy, or Bloomberg Philanthropies.

  • Competing interests None declared.

  • Provenance and peer review Not commissioned; externally peer reviewed.

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