Tobacco tax reform needed to curb corruption and increase revenue while saving lives in India

New research published in the October 15th issue of Economic & Political Weekly shows that tobacco tax increases in India from 7% to 33% on bidis and from 43% to 58% on cigarettes would lead to 14 million smokers quitting and 27 million children never starting to smoke. This translates to 69 million years of saved healthy life over the next 40 years. The article is led by Professor Prabhat Jha, Centre for Global Health Research, Dalla Lana School of Public Health, University of Toronto, Canada.

Researchers contend that India’s relatively high tobacco consumption is partly the result of historically low or non-existent taxes on bidis, and an inefficient, complex taxation system on cigarettes. Authors state that the major consequences of this “chaotic tax structure” include: 1) increased tobacco consumption; 2) difficulty adjusting for income growth and inflation; 3) marked variation in tobacco taxes by cigarette length, allowing the industry to distribute cigarettes of various lengths to minimize the effects of any tax increase; 4) increased corruption and tax evasion due to the difficulty of enforcing the complex tax structure; and 5) a far less predictable revenue stream for government.

Study authors argue that these unwieldy systems should be reformed to more efficiently deter smoking in the country and provide an increase in annual tax revenue of about 1.2%. Specific recommendations for the Government of India include implementing a tobacco control strategy that uses research and policy regulation to curb consumption, and adopting higher, more effective levels of taxation on bidis and cigarettes that adjust for annual inflation.

Read the full article here: A Rational Taxation System of Bidis and Cigarettes to Reduce Smoking Deaths in India


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