Plain packaging & tobacco taxes: an antidote for manipulation and deception

For 2016's World No Tobacco Day, celebrated today, the World Health Organization (WHO) and the Secretariat of the WHO Framework Convention on Tobacco Control (FCTC) are calling on countries to get ready for plain packaging of tobacco products.  Why, may you ask? 

The importance of this regulation is best explained in “Phishing for Phools” a new book by Nobel Prize Laureates in Economics, George Akerlof (2001) and Robert Shiller (2013). We humans think in terms of stories, Akerlof and Shiller observed, and our decisions are consequently determined by the stories we tell ourselves. Advertisers use this to their advantage by “graph[ing] their story” onto ours, and thereby influencing the decisions we make—in this case, to get us addicted to tobacco use, particularly teenagers and low-income people. 

Australia passed legislation in 2012 to reduce the appeal of smoking by restricting the use of logos, colors, brand images, or promotional information on packaging other than brand names and product names displayed in a standard color and small font below hard-hitting warnings depicting the negative health consequences of smoking. In the two years following the law, tobacco consumption declined 12.8%, which some have attributed, in part, to the legislation.

Other countries are starting to follow Australia’s example.  Similar regulations approved in France and the United Kingdom are set to begin implementation in 2016, and they are under formal consideration in several other countries across the world.  Uruguay and Thailand already mandate that at least 80% of front and back of the packaging be covered with graphic health warnings.  And Mauritius leads Africa in terms of requirements for tobacco packaging and labelling.

The arsenal of effective consumer protection regulations that contribute to reduce the social acceptability of smoking also includes advertising bans, smoke-free public spaces, and restricting sales to minors. In the United States as mandated to the U.S Food and Drug Administration (FDA) by the 2009, “Family Smoking Prevention and Tobacco Control Act,” regulatory agencies have authority to regulate the manufacture, distribution, and marketing of tobacco products, including e-cigarettes, like any other drug.

Cigarette taxes also play an important role in tobacco control.  Evidence presented by high-level officials from China, Philippines, Uruguay, and the United States at a global tax conference held at the World Bank this past week, shows that raising tobacco taxes increases prices, reduces consumption, and improves the public health by reducing ill health and premature death.
 

Contrary to the assumption that tobacco taxes are financially regressive, Jason Furman, the Chairman of the US President’s Council of Economic Advisers, illustrated how the sum of benefits fully offset the additional cost of taxes on consumers—tobacco taxes disproportionately benefit lower income households because as tobacco taxes increase, better health ensues, less money is needed for smoking-related healthcare services, and labor productivity improves due to reduced sickness and absenteeism.  

Raising tobacco taxes is also an easy way to raise domestic revenue for health and other priority investments, as it is done in the Philippines under the 2012 Sin Tax Law to expand health insurance coverage to 15 million poor families or about 45 million people, and in the United States after federal tobacco taxes were increased in 2009 by US President Obama to fund the expansion of the Children's Health Insurance Program (CHIP) for low-income children.  The 2015 excise tax increase at the wholesale level in China, which has increased the tax rate as a percentage of the retail price from 49% to 56%, is a significant step for China, not only because the country is the largest producer and consumer of tobacco in the world, but also to deal with the growing burden of non-communicable diseases. The experience of Uruguay, a country with one of the most comprehensive tobacco control laws in the world, shows that its application has significantly decreased smoking among adults from nearly 50% to about 20% over the past decade.

We have to be clear that tobacco control measures, such as plain packaging and higher taxes, are not part of a “nanny state” designed to hinder “free choice” in society.  For those of us who have lost loved ones due to tobacco-related diseases, the story is a painful one. Simply told, our loved ones had become addicted to cigarettes, a product that unlike any other product on the market, kills when used as promoted by the “feel good” stories of manufacturers.  Indeed, despite new year’s resolutions and promises to quit, they could not shake off the “urge” to smoke! 

On this World No Tobacco Day, the international community needs to recommit itself to support countries in adopting plain packaging legislation to make tobacco use less attractive and increase taxes to make tobacco products less affordable.  Improving public health and protecting future generations from the risks of tobacco use should be a priority in the global social contract.  We owe it to the memory of our loved ones and to the millions of people who have died prematurely because of their tobacco addiction.
 
Related:

World Bank Live: Winning the Tax Wars: Expanding the Global Tax Base: Taxing to Promote Public Goods, Tobacco Taxes

WHO: Get ready for plain packaging brochure: World No Tobacco day 2016

Remarks and Slides: Six Lessons from the U.S. Experience with Tobacco Taxes, Jason Furman, Chairman, US President's Council of Economic Advisers at World Bank panel on tobacco taxes

The Global State of Smoking in 5 Charts

World Bank Group Tobacco Website