05 April 2012
BEIRUT: A significant increase on tobacco taxation could boost government revenues by some $170 million, reduce the number of smokers and clamp down on soaring health expenditures, argued a study by the American University of Beirut Wednesday.
The study, presented by AUB’s Tobacco Control Research Group at the Grand Serail Wednesday, said Lebanon’s taxes on tobacco, currently ranging between 30 and 50 percent, remain among the lowest in the region.
It said the figure remains much lower than a 70 to 80 percent average across other upper middle income countries.
Lebanon’s lax taxation policy and low prices of tobacco directly contribute to the country’s very high percentage of smokers as well as a high level of tobacco consumption, the researchers argued.
“Over 20 percent of Lebanese adults are smokers,” said AUB assistant professor Jad Chaaban, who co-authored the study, warning about the drastic health consequences tobacco has on the country.
He added that Lebanese youth were particularly affected by the low prices.
“The Lebanese spend over $553 million on tobacco products annually. The figure includes some $512 million spent on over 307 million packets of imported cigarettes,” added assistant professor Nisreen Salti, highlighting that Lebanese tobacco consumption per capita is among the highest in the world at 12 packs per month.
The AUB study simulated the influence of a significant hike of tobacco taxes on consumption, tax revenues and smuggling.
The study examined demand elasticity for locally produced and imported cigarettes, and nargileh tobacco producing a policy recommendation for an optimal tobacco taxation model that takes into consideration government tax revenues.
According to the paper, an optimal increase on taxation should stipulate a 50 percent increase across the board on all tobacco products.
The government should also place a health risk tax of LL250 per pack for local cigarettes, LL1,500 for imported cigarettes, and LL500 per pack of nargileh tobacco.
It suggested that the health risk tax revenues should be utilized for public health projects.
The study suggests that the tax hikes, totaling 140 percent, would lower consumption by 7 percent for imported cigarettes, 92 percent for locally produced cigarettes, and 26 percent for nargileh tobacco.
Chaaban said that even when the study simulated a 200 percent increase in smuggling, the government would still earn a 52 percent increase on its revenues above the $230 million it already makes in tobacco taxation.
He said the government would also be saving millions of dollars in health expenditures on tobacco-caused sickness on the long term.
Finance Minister Mohammad Safadi, who spoke on behalf of Prime Minister Najib Mikati, said he supported increasing tobacco taxation but cautioned that smuggling should be taken more seriously.
“We realize that increasing taxation on tobacco has a positive impact, particularly on public health, and we are even ready to give up tax revenues on tobacco,” he said. “But we do not want smugglers to reap revenues.”
He said a significant increase in taxes would induce a massive surge in smuggling, adding that Lebanese Customs would be unable to prevent smuggling in case prices became significantly higher than neighboring countries.
Safadi said an increase in taxes should be coordinated by governments in the region to make the tobacco smuggling business less lucrative.
Nevertheless Safadi said his ministry has been mulling new taxes on tobacco but added that it was too early to hand out details.
“Countries like Turkey that had a higher percentage of smokers were able to implement very successful tobacco control through higher taxation,” said assistant professor Rima Nakkash: “We believe that Lebanon could be the next success story in tobacco control.”
Copyright The Daily Star 2012.
