1. April 18, 2017, WBG/IMF Spring Meetings, Washington, DC
The distributional impact of tobacco taxes on household health and finances in rich and poor smokers
Stéphane Verguet
April 18, 2017, WBG/IMF Spring Meetings, Washington, DC

2. Tax is the single most effective tobacco control policy
France: cigarette consumption & inflation-adjusted price (Hill et al. 2010)

3. Yet, one specific policy issue with tobacco tax: it is often regarded as regressive
Most assessments to date assume individuals with different income to be responsive to tax increase in the same way!
Objective: use Extended Cost Effectiveness Analysis (ECEA) to examine regressivity of increased tobacco taxes

4. ECEA: Health Policy Assessment, with dimensions of equity & medical impoverishment
Extended Cost-Effectiveness Analysis (ECEA)
Distributional consequences across distinct strata of populations (e.g. socio-economic status, geographical setting, gender)
Financial risk protection: quantify household medical impoverishment averted by policy
Verguet, Laxminarayan & Jamison. Health Economics 2015
Verguet, Kim, Jamison. PharmacoEconomics 2016

5. ECEA of tobacco tax Increase retail price of tobacco Poorest Poor
Health benefits
Generation of excise tax revenues
Changes in
household cigarette expenditures
OOP tobacco-related disease expenditures
averted
Financial risk protection benefits
Poorest
Poor
Middle
Rich
Richest

6. ECEA study of increased tobacco excise tax in China
Verguet, Gauvreau, Mishra, MacLennan, Murphy, Brouwer, Nugent, Zhao, Jha, Jamison. “The consequences of tobacco tax on household health and finances in rich and poor smokers in China: an extended cost-effectiveness analysis.” Lancet Global Health 2015; 3:e

7. Tobacco in China Tobacco prevalence (males) Tobacco-related mortality
50%; 300 million smokers
15 cigarettes per day; varies slightly by socioeconomic status
Tobacco-related mortality
Risk of premature mortality from smoking = 50%
1M annual deaths
Stroke (46%); heart disease (23%); neoplasm (20%); COPD (11%)
Out-of-pocket expenditures
Only 50% of inpatient healthcare costs (e.g. cancer, stroke costs) reimbursed by insurance schemes
Stroke ($2,000), heart disease ($11,000), cancer ($14,000)
Price elasticity of cigarette consumption (based on reviews)
on average
(poorest) to (richest)
Youth (< 25 year-olds) are twice as price elastic

8. Results of 50% price hike (1): premature deaths averted
Total: 13 million
(95% UI: 11-15)
over 50 years

9. Results of 50% price hike (2): additional excise tax revenues
Total: 700 $ billion
(95% UI: )
over 50 years

10. Results of 50% price hike (3): changes in household tobacco expenditures
Total: 370 $ billion
(95% UI: ) over 50 years

11. Results of 50% price hike (4): financial risk protection
Total: 1.5 $ billion
(95% UI: )
over 50 years
Total: 23 $ billion
(95% UI: 19-28) over 50 years

12. Summary: Pro-poor angles of tobacco tax
50% tobacco price increase, China
Summary: Pro-poor angles of tobacco tax
95% uncertainty contours
I = Bottom income quintile

13. ECEA study of increased tobacco taxes in Colombia
Joint work with:
Roberto Iunes, Manuela Villar Uribe – World Bank
Camilla Franca – Ministerio de Salud y Protección Social, Colombia
Erin James - Harvard

14. Tobacco in Colombia Tobacco prevalence Tobacco-related mortality
12 % of population; about 3 million smokers
12 cigarettes per day; varies slightly by socioeconomic status
Tobacco-related mortality
26,000 deaths annually (16% of deaths among population > 35)
Stroke (9%); heart disease (26%); neoplasm (31%); COPD (33%)
Tobacco-related expenditures
Treating tobacco-related diseases costs $4.3 billion or 0.2% of GDP
Price elasticity of cigarette consumption (based on reviews)
(poorest) to – 0.21 (richest)
Youth (< 25 year-olds) twice as price elastic
Prospective tax increase simulated
Parliament passed increase in excise and VAT taxes in December 2016:
- tripling of excise tax by 2019
- 3 percentage point increase in VAT

15. Preliminary results: distributional findings

16. ECEA of tobacco tax enables examining distributional consequences and priority setting beyond the health sector
Estimate equity and poverty reduction benefits of policies i.e. poverty cases averted per policy $ invested
1000
Poverty averted per health
policy $1M invested
800
Poverty averted per education policy
$1M invested
600
Poverty averted per transport policy $1M invested
Intersectoral comparison by
Ministry of Finance & Development

17. http://www.hsph.harvard.edu/steph ane-verguet/
Web:
ane-verguet/