Analyses of 2017 Union Budget Tobacco Tax Increase

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Experts find that the tobacco tax increase in India’s Union budget 2017 is insufficient to improve public health

WHAT DID THE UNION BUDGET PROPOSE ON TOBACCO TAXES?

  • The Union Budget 2017 modest tax increase will raise cigarette prices by about only 16 paise per stick (a 6% tax increase resulting in a 3% higher sales price). This increase is too small to reduce consumption.
  • The 16 paise average cigarette increase does not keep up with increases in income and consumer spending, meaning that in relative terms, the Union Budget could contribute to an INCREASE in smoking, especially among younger smokers.
  • This is the second year in a row that the most important tax on cigarettes has not been raised.
  • The lack of a BIG tax increase enables the cigarette industry to use the modest higher tax to raise prices more than just the tax, conveniently pocketing the extra profits. Thus, the Union Budget tax hike may raise profits for the tobacco industry versus yielding greater revenues for the Government of India.
  • The tax structure remains too complex. India’s tax structure, after years of influence by the cigarette industry allows smokers to switch down to cheaper cigarettes. This can negate ANY public health benefit of reduced consumption.
  • By contrast a single large BIG tax per stick on ALL lengths would decrease switching by smokers, simplify tax collection and decrease tax evasion by the tobacco industry.

 WHAT IS NEEDED?

  • The Ministry of Finance should announce a SPECIAL Rs. 4 per stick excise on ALL lengths of cigarettes.
  • There is NO difference in health risks between machine and hand rolled bidis. The Ministry of Finance should tax both at the new rate of Rs. 78 per thousand sticks.

 Read the full analysis here

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