Table 2

Industry arguments to influence tax levels

Industry arguments to keep tobacco taxes lowAssessing industry arguments against available evidence
(1) Higher taxes will lead to illicit trade (especially smuggling) and, relatedly, organised crime13–15 17 18 22 23 26 31 38–41 49 51–54 56 Comparative assessments show the countries with the highest rates of smuggling are not those with the highest levels of tobacco taxes.8 59 In addition, two studies in this review found the industry was directly involved in smuggling when using this argument.26 40 A decision to reduce taxes in Canada in response to this argument increased smoking rates in young people without significantly reducing smuggling.26 40
(2) Tobacco tax is regressive so higher taxes are unfair on poorer and more marginal groups in society20 21 27 28 31 32 38 39 41 43 44 48 50 54 56 Although tobacco taxes do represent a higher percentage of the income of poorer consumers (because poorer groups tend to consume more tobacco products and because tobacco taxes represent a significantly higher proportion of their incomes),60–62 tobacco tax increases can also be viewed as progressive because poorer smokers are more price sensitive.61–63 The International Agency for Research on Cancer (IARC) found strong evidence that tobacco use among lower-income populations is more responsive to tax and price increases than tobacco use among higher-income groups (in high-income countries).8
(3) Tobacco taxes are unfair on, and punitive towards, smokers13 23 27 29 30 36 37 41 42 45 51 52 While some may agree that high tobacco taxes are unfair on smokers, it is also true that most smokers want to quit,64 65 and that higher prices induce smokers to quit8
(4) Tax increases will have negative economic impacts on local business and employment levels as they will lead to greater cross-border trade and/or purchases from shops with tax breaks on tobacco products (eg, shops on Native American Reserves)26 31 32 38 39 41 49 50 54 Although tax increases can lead to some tax avoidance (eg, through cross-border trade), IARC found such behaviour failed to eliminate the larger public health benefits and was not associated with significant negative economic impacts, such as unemployment8
(5) Tax increases will lead to declines in government revenue (or less revenue than predicted)13 19 26 31 49 54 IARC found tobacco tax increases lead to more, not less, government revenue8
(6) Tax increases, by increasing illicit and cross-border trade, will make it easier for young people to access tobacco products49 50 52 In addition to the fact that broader evidence indicates there is no clear association between higher taxes and illicit trade (see above), IARC found tax increases are particularly effective at reducing consumption among young people, who tend to be more price sensitive8
(7) Denial of link between increased tobacco prices (as a result of increased taxes) and reduced consumption26 28 A great deal of evidence supports this link as summarised in the recent IARC review.8 Evidence also indicates that the industry has been aware of this relationship for many years.66 Indeed, one study in this review found evidence of the industry arguing that tax increases would result in job losses precisely because such rises would reduce consumption.13