Why increase in tobacco excise tax is unlikely to curb smoking

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                               (Commentary Today Thursday 22 February 2018)

        Why increase in tobacco excise tax is unlikely to curb smoking

By Andrew da Roza

Tax increases have made no impression on daily smoking preval‎ence rates in Singapore over the years,

says the author.

Updated 22 February, 2018

The 10 per cent increase in tobacco excise tax that Finance Minister Heng Swee Keat announced in his Budget speech is likely to have only a modest effect on decreasing smoking preval‎ence in Singapore and the effect is likely to be temporary.

The main reason is that it is simply too small an increase.

It is true that several scientific studies have shown strong evidence of a predictable correlation between increases in cigarette taxes and decreases in cigarette consumption. However, there are a number of things to take into account when trying to predict the sizes of the smoking preval‎ence decreases.

When calculating at what level to increase taxes to impose a material deterrent effect, it is important to look at the increases in real incomes.

By way of an example, the last tobacco excise tax increase in Singapore was in 2014 and it was also 10 per cent. Median household real incomes from work, per household member, increased 20 per cent between 2014 and 2017.

That means that cigarettes remained affordable, because incomes increased more than the taxes. If we project another real income median increase of 20 per cent between 2018 and 2021, in line with historical medians, cigarettes will continue to remain affordable.

In fact, tax is one of the few areas that Singapore is not meeting the World Health Organisation recommended tobacco controls, under the WHO Framework Convention on Tobacco Control.

Singapore’s cigarette tax incidence is 66 per cent and the WHO recommendation is a minimum of 70 per cent.

Tax incidence typically measures how much the burden of the tax is borne by the smokers. Cigarettes tend to be relatively price inelastic, meaning that price increases do not effect buying decisions as much as they might do, with say, luxury goods.

In addition to tax incidence, the WHO measures whether cigarettes are less affordable over time.

In the Singapore Country Profile of the 2017 WHO report on the global tobacco epidemic, there has been no change in affordability in Singapore between 2008 and 2016.

This may explain why tax increases have made no impression on daily smoking preval‎ence rates in Singapore over the years. These preval‎ence rates were:

2001 13.8 per cent

2004 12.6 per cent

2007 13.6 per cent

2010 14.3 per cent

2013 13.3 per cent

We do not have any preval‎ence figures more current than 2013, pending the publication of the 2016-17 Singapore National Population Health Survey of 12,000 households, that was completed in May 2017.

Singapore is not alone. Despite the Australian Government’s strict adherence to the WHO tobacco control guidelines, Australia has also been “flat lining” smoking preval‎ence over the last 10 years at about 15 per cent – nearly four million people.

If what is being done is not working to decrease smoking preval‎ence, one can either do more of the same or try something different.

The Australian Government’s answer to this conundrum was to do more of the same, by passing a new law in 2016 that will raise taxes on tobacco by 12.5 per cent every year on Sep 1 until 2020.

A pack of cigarettes in Sydney today costs S$31 (versus Singapore’s current cost of S$10 - S$13) and it will cost SGD$42 by 2020.

It is not clear whether Singapore is willing to support similarly Draconian tax increases.

One possible risk of doing so is that it could encourage a bigger black market in cigarettes.

A more striking point is that the increases will hit those with lower disposable income hardest, as lower income families typically smoke more and have less success at quitting.

So large increases in cigarette prices can be considered socially divisive and widely unpopular.

That is probably why a debate is currently raging in Australia between those who believe that the only way to materially decrease preval‎ence is to harness the growing nicotine replacement technology that Governments in the United Kingdom, Canada, New Zealand, the United States, Japan and Korea have adopted to such remarkable effect.

Smoking preval‎ence in these nations has plummeted at rates never before seen. E-cigarettes have been thought to account for over six million less smokers in Europe and over 20,000 less smokers in the United Kingdom a year; and millions in the US.

In Japan and South Korea, heat-not-burn products have done what e-cigarettes have done in the UK and Europe.

Notably, Japan Tobacco has had an unprecedented drop in the sales of cigarettes of 17 per cent year over year and this is reflected in the financial results of the other tobacco companies.

The Japanese and South Koreans are leaving their cigarettes in droves and taking up heat-not-burn products.

These new technologies have been shown to be between 90 and 95 per cent more safe than cigarettes and to assist smokers to quit.

To be sure, more scientific evidence is needed to develop better regulations that reduce the risks even further.

As noted above, in Singapore, preval‎ence rates are stagnant. The 2010 statistics show that over 2,500 smokers and 250 non-smokers died from smoking related causes each year - one in seven smokers dies from smoking related causes each day.

In the 20 years before 2010, smoking among females had increased 22 per cent; 24 per cent of men smoked daily in 2010; smoking preval‎ence of young adults (aged 18-29) increased 33 per cent between 2004 and 2010 preval‎ence ; and today, seven out of the ten top diseases in Singapore – including diabetes – are smoking related.

Giving smokers choices to quit rather that financially penalising them for an addiction they cannot control is more in keeping with a compassionate and cohesive nation - but it is also so much more effective.

ABOUT THE AUTHOR:

Andrew da Roza is a psychotherapist and member of several expert committees dealing with addiction, including the Singapore Anti-Narcotics Association.