The UAE Government has announced an excise tax on tobacco and at 100 per cent of the existing price. How effective can this be from a public health point of view to reduce the prevalence of smoking in the country?
Tobacco is one of the leading preventable causes of death in the world, killing over 6 million every year (and another 600,000 of those exposed to constant smoke). This results in an estimated economic cost of almost $1.5 trillion (Dh5.51 trillion) a year, or 1.8 per cent of the world’s GDP.
Smoking prevalence for adult residents in the UAE is typically estimated at between 15 to 30 per cent, depending on sources and methodology, which is generally considered to be an average to moderately high number. This makes the excise tax a very positive initiative by the government.
Excise taxes on tobacco are typically part of a larger programme called the “MPOWER” by World Health Organisation, which consists of six measures (including taxation) to effectively reduce smoking prevalence in a country. The UAE Government signed the WHO Framework Convention on Tobacco Control in 2005 and has since worked on successfully implementing them.
As countries are at different stages of implementation of this protocol, it is difficult to assess the exact comparative weight of each of the six instruments in decreasing tobacco prevalence in a given country. But what stands out significantly from experience in most countries is that taxation is by far the single most effective tool to achieve results, when compared with each of the five other instruments individually.
Research conducted in 2014 based on results in different countries established that on average a 25 per cent price increase yields a 7 per cent decrease in tobacco prevalence in the initial years and increasing over time to 14 per cent, with the taxation measures mainly targeting low-income groups.
But as effective as the introduction of excise tax can be, the results essentially depend on its amplitude and, more importantly, on the final price of cigarette packs in proportion to the disposable income of those who are the main tobacco consumers in a given market.
Based on my experience, it is possible to decrease smoking prevalence by as much as 40-50 per cent in a country over several years, by setting the final price of tobacco at high levels and combining with other measures. New York for instance introduced excise tax on tobacco in 2002, and this has reached over time $8, which represents about 65 per cent of today’s prices of a cigarette pack.
Combined with other measures such as Smoke Free Policies, media campaigns and helping those who wants to quit (=cessation programs), this has had positive results, with the smoking prevalence reducing by 30 per cent from 20 per cent to 14 per cent.
It is too early to calculate the effectiveness of the 100 per cent excise tax in the UAE. But 100 per cent of the old price (that will equal 50 per cent based on the new price) is a positive step towards achieving measurable results in reducing smoking prevalence. Based on an initial comparative analysis, I expect the reduction in smoking over the next 5 years directly resulting from this tax to reach between 2.5-7.5 per cent in absolute terms (conservatively representing a 15-25 per cent drop depending on the exact prevalence number).
This would be a noticeable achievement. Nonetheless, even if taxation clearly stands out at the single most effective tool, the combination with other instruments should not be discounted, as it has often proven to be critical in the overall success of this public health effort and in achieving a faster combined effect.
In Brazil for instance, which is a case study of highly successful MPOWER implementation, prevalence was reduced by 46 per cent because of the right combination of measures. Another study estimates that almost half of the reduction was explained by price increases, while 14 per cent were achieved by smoke-free laws, 14 per cent by marketing restrictions, 8 per cent by health warnings, 6 per cent by anti-smoking media campaigns, and 10 per cent by cessation treatment programmes.
The model estimated that almost 420,000 tobacco-related deaths had been averted by 2010 and that almost 7 million deaths would have been averted by 2050.
Extrapolating to the UAE to anticipate exact effects is unfortunately an impossible exercise, as a unique statistical model should be built to reflect market specifics and local data. But the underlying argument remains valid and field experience shows that combined instruments significantly amplify results derived from excise taxation taken alone, complementing and strengthening them.
In certain cases, even insufficient level of taxation can be compensated by other strong measures, as successfully implemented in Russia before and after the Sochi Olympics. These are all good reasons to be optimistic about the potential for smoking prevalence decrease in the UAE, if other effective tools are being used to complement an excise tax.
— The writer is a public health specialist residing in Dubai who has advised organisations and governments on health policy including tobacco control and related problems.