Tax on cigarette: India doesn’t tax them enough, below best international practices, says report

MUMBAI: Amidst all the cacophony of smokers cribbing about rising prices in India, the country’s tax burden on cigarettes is far below the standard of best international practice, a study has shown.

India got an overall score of 1.88 out of 5 possible points, which is slightly better than the South-East Asia average (1.82), but lower than the global average (2.07) and scores of top performing countries (4.63), a Tobacconomic report said.

“The current tax burden on cigarettes in India is 52% and is far below the standard of international best practice. The lack of increase in taxes on tobacco products after the introduction of the GST in the year 2017 has increased the affordability of cigarettes in India. This and the complex tiered cigarette tax structure in India have significantly contributed to a reduced score for India in this scorecard. India must reduce the number of tiers for the purpose of cigarette taxation and significantly increase its existing excise taxes on tobacco products to save lives and raise much needed revenue” said Dr. Rijo John, a health economist and adjunct professor at the Rajagiri College of Social Sciences, Kochi.

Tobacconomic which is based at the University of Illinois at Chicago’s Institute for Health Research and Policy conducts economic research to inform and shape fiscal policies for health globally. Tobacconomics released the first edition of the International Cigarette Tax Scorecard, assessing the performance of cigarette tax policies in over 170 countries including India.

“The Scorecard shows considerable untapped potential for cigarette tax increases to raise revenue for a COVID-19 recovery and importantly, prevent premature deaths and promote a healthy and productive workforce,” says Tobacconomics director and lead author of the scorecard, Frank J. Chaloupka.

India had significantly improved its score on cigarette taxation policy from 1.38 in 2014 to 2.38 in 2016 after which it declined to 1.88 in 2018 due to the lack of tax increases on tobacco and increasing affordability of cigarettes. Overall scores, however, improved in 89 countries. Introduction of significant cigarette excise taxes, simplification of previously complicated tiered cigarette excise tax structure and large tax increases are the reasons why some countries improved their scores, and they are already reaping the rewards of higher revenues and lives saved, the report said.

“Indian and global studies are providing clear evidence of how tobacco use in all forms, whether smoking or chewing, is leading to severe COVID-19 manifestations and adverse outcomes. Regular tax increases on tobacco products will reduce their consumption and generate much needed revenue to strengthen health promotion and prevention programs. This will also help address the comorbidities of tobacco use and COVID-19 pandemic in India’’ said Dr Harit Chaturvedi, Chairman of Max Institute of Cancer Care.