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May, 2017:

What’s keeping Indonesia, China addicted to smoking?

A World Trade Organisation ruling backing Australia’s hard line on cigarette packaging highlights a gulf between Asia and much of the rest of the world

http://www.scmp.com/week-asia/society/article/2094162/whats-keeping-indonesia-china-addicted-smoking

It was during a trip to Egypt in 1995 when Edison Siahaan first felt that something wasn’t quite right with his throat. Four decades had gone by since he started smoking at the age of 15. His voice had been raspy for years. Maybe this was just the dry air tickling the back of his throat.

But it wasn’t dry air and it wasn’t a tickle. It was cancer. Doctors excised a portion of his trachea leaving a hole the size of a nickel at the base of the throat. He lost his bank job because for a year following the surgery he couldn’t speak. Even now, what passes for speech makes him sound like the emperor from Star Wars only with more hissing. Now 79, Siahaan, a kindly old gent with a full head of hair, is tough to look at. “I see kids smoking all the time here,” he says, gesturing back and forth along the length of the street from his front room. “It makes me sick to think they are going to ruin their life. I point at this hole in my throat and say to them: do you want to look like this?”

Asian men already account for the lion’s share of the world’s tobacco related illnesses, yet a World Trade Organisation ruling this week that upheld tough anti-smoking rules introduced in Australia in 2012, showed that if anything, the gap in attitudes between Asia and the rest of the world may be widening.

“Tobacco in China is absolutely devastating,” says Dr Angela Pratt who helps handle external relations at the World Health Organisation’s office for the Western Pacific in Manila.

In China, roughly 300 million people smoke, according to the WHO. Most of these are men. More than half of Chinese adults are smokers and two-thirds of young Chinese men start smoking. While smoking rates are steady, the absolute number of smokers is rising in line with population growth. Chinese smokers account for 44 per cent of all the cigarettes puffed in the world. At current rates 200 million Chinese will die this century from tobacco-related illnesses, Pratt says. “That’s a huge burden. The people afflicted are often the sole income earners,” she says.

This week, the WTO ruled that Australia’s plain packaging rules, which ban branding and distinctive colouring from packs of cigarettes, were a legitimate public health measure. The ruling knocked back a complaint from Indonesia, Cuba, Honduras and the Dominican Republic, who said the rule amounted to an illegal trade barrier. As the former chief of staff to the Australian health minister who introduced the plain packaging measures, Nicola Roxon, Pratt helped develop the policy, bulletproofing it from court challenges from tobacco companies and governments.

“We were proud to be taking on plain packaging,” Pratt recalls. “But we wanted to be sure to be able to defend it.”

Together with graphic warnings and taxes that will push cigarettes up to A$40 (HK$230) per pack by 2020, the measure is credited with accelerating the fall in Australia’s smoking rate. The most recent figures show about 13 per cent of Australian adults smoke and less than five per cent of school children. A dozen countries, from Canada to Chile and Britain to Uruguay are either introducing similar rules or seriously considering them.

At the other extreme is Indonesia. The most recent figures, which date back to 2013, show 240,000 Indonesians die every year from tobacco related illnesses. Two-thirds of Indonesian men and boys, over the age of 15, smoke, according to the Ministry of Health.

Most troubling are the numbers of new young smokers throughout the archipelago, says Dr Widyastuti Soerojo, chair of the tobacco control unit at the Indonesian Public Health Association. She says some 16 million Indonesian youngsters between the ages of 10 and 19 experiment with smoking every year – a rate of about 44,000 every day.

Indonesia is among the few countries that are not signatories to the United Nation’s Framework Convention on Tobacco Control, which among other things aims to curb the appeal of smoking for children.

Indonesia television and billboards feature handsome intrepid men jumping out of planes or into business meetings. Roadside kiosks individually sell clove cigarettes, known as kretek, for as little as 10 US cents each.

Governments in Jakarta and local governments in vote-rich provinces, such as Central Java and East Java, fend off calls for more curbs on smoking saying they provide badly needed jobs to rural families.

But mechanisation and growing taste for machine-made cancer sticks rather than hand-rolled types, belie that argument. Tobacco accounts for about half of one per cent of all jobs in Indonesia, according to the Southeast Asia Tobacco Control Alliance. Campaigners are quick to point out the country’s richest families have tobacco to thank.

The Hartonos, Indonesia’s richest family and worth US$17 billion, own kretek maker Djarum.

Indonesian cigarette sales totaled US$16 billion in 2015. Sampoerna, which is more than 90 per cent owned by Philip Morris, is Indonesia’s most valuable company.

“The government treats tobacco like it’s a normal industry but really this is neocolonialism by tobacco companies,” Dr Soerojo says.

In China, the culprit for health advocates is the China National Tobacco Corporation, which controls more than 98 per cent of the local market. Implementation of the UN tobacco convention falls to the Ministry of Industry, which is also home to the body that owns China Tobacco. “A parallel would be, back when I was with the health ministry, meetings were chaired by a representative of Philip Morris,” Pratt said. “There’s plenty of room for conflict of interest.”

Still, there’s progress. Beijing, Shanghai and Shenzhen, with a combined population of more than 60 million, have banned smoking in public areas. China hiked taxes on cigarettes in 2015. The move resulted in a 20 per cent jump in the retail prices of the cheapest brands. Owing to its massive market, that move alone resulted in a more than 2 per cent drop in world tobacco consumption in 2016.

In Indonesia, smoking is banned in most public spaces but enforcement peters out the further one travels from the centre of Jakarta. Indonesia introduced graphic warnings on packaging in 2012 and hiked excise taxes on cigarettes by 15 per cent in 2016. Even so, additional hikes for this year were scotched. Glimmers of light are on the horizon, says WHO’s Pratt, but plain packaging is still “a long way off”.

For Siahaan, his government’s halting go-slow approach is proof that cigarettes are insidious, and for him, more ruinous than narcotics. “At least with drugs you can get help,” he gasps. “For cigarettes, you see them everywhere.”

Cigarette tax hike takes effect June 20th

The price of cigarettes will increase by NT$20 (US$0.6) per pack starting on June 20th

http://www.taiwannews.com.tw/en/news/3160480

The Ministery of Finance announced Thursday that the price of cigarettes will increase by NT$20 (US$0.6) per pack starting on June 20th, after the Legislature passed the third and final reading of an amendment to the Tobacco and Alcohol Tax.

The amendment raises the cigarette tax from NT$590 per 1,000 cigarettes (per kilogram) to NT$1,590, which translates into a tax per packet of NT$31.8, up from the current NT$11.8.

The increase will generate NT$23.3 billion in additional tax revenue per year, which will be used to fund the long-term care program for seniors, according to the Finance Ministry.

Finance Minister Sheu Yu-jer said earlier this year that he believed the policy would also help curb tobacco consumption and promote public health.

Anti-smoking group seeks to raise legal smoking age to 20

Around one billion people will die from tobacco-related causes by the end of the 21st century if current smoking patterns continue…

http://www.taiwannews.com.tw/en/news/3159764

Taiwan’s anti-smoking group held a press conference on Wednesday calling for higher legal smoking age and completely smoke-free workplaces and indoor public places.

The group has called on the Legislature to revise the nation’s Tobacco Hazards Prevention Act comprehensively to correspond to the requirements of the WHO’s Framework Convention on Tobacco Control (WHO FCTC).

WHO FCTC is the first treaty negotiated under the auspices of the World Health Organization that was developed in response to the globalization of the tobacco epidemic.

Democratic Progressive Party (DPP) legislator Chen Man-Li (陳曼麗) and Kuomintang (KMT) legislator Ko Chih-En (柯志恩) both showed up to the press conference today in support of the group.

Taiwan Heart Foundation’s Chairman Lue Hung-chi (呂鴻基) said today that around one billion people will die from tobacco-related causes by the end of the 21st century if current smoking patterns continue.

Major changes that the group has called for include bans on smoking in all workplaces and indoor public places, increase the size of warnings on tobacco packs to 85% of the surface area and with mandatory plain packaging, bans on sponsorship from tobacco companies, bans on the sale of flavored cigarettes, extend all the smoking-related bans to include e-cigarettes, and raise the legal age for smoking from 18 to 20.

Evaluation of Nicotine Pharmacokinetics

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Tobacco Control Program

Context

Tobacco use, and its negative health, social and economic impacts, is a significant global health challenge.

http://www.worldbank.org/en/topic/health/brief/tobacco

According to the 2015 World Health Organization (WHO) Report on the Global Tobacco Epidemic, in 2013, 21% of adults globally were current smokers – 950 million men and 177 million women. Despite increasing global population between 2007 and 2013, smoking prevalence has actually declined worldwide from 23% in 2007, preventing an increase in the number of smokers in the world. The total remains at 1.1 billion smokers globally in 2013.

Tobacco use is a leading global disease risk factor and underlying cause of ill health, preventable death, and disability. It is estimated to kill more than 5 million people each year across the globe. If current trends persist, tobacco will kill more than 8 million people worldwide each year by 2030, with 80% of these premature deaths taking place in the developing world.

In 2015, the “Addis Ababa Action Agenda” adopted at the Third International Conference on Financing for Development held in Addis Ababa, Ethiopia — and later endorsed by the United Nations as part of the Sustainable Development Goals (SDGs) — recognized that public policies and mobilization, and effective use of domestic resources, underscored by the principle of national ownership, are central to the common pursuit of sustainable development, including achieving the SDGs.

Clause 32 of the Addis Ababa Action Agenda states that price and tax measures on tobacco are viewed as an effective and important means to reduce tobacco consumption and health care costs, and represent a revenue stream for financing for development in many countries.

The Action Agenda also stresses that the tobacco tax agenda is fully consistent with obligations acquired by 180 countries that are parties to the WHO Framework Convention on Tobacco Control (FCTC) (an additional seven countries have signed the FCTC but have not ratified it, and only nine countries are neither signatories or parties to the FCTC).

World Bank Group Tobacco Control Program

The World Bank Group’s Global Tobacco Control Program assists countries in fostering and implementing tobacco tax reforms to achieve public health goals by reducing tobacco affordability and consumption, and for mobilizing domestic resources to expand the fiscal space to fund priority programs and investments that benefit the entire population, and controlling illicit trade on tobacco by strengthening customs systems. Work has been carried out over 2013-2016 in Philippines, Bostwana, Ghana, Namibia, Vietnam, Georgia, Indonesia, and Peru; more recently, for the support of tobacco tax reforms adopted in 2017 in Armenia, Colombia, Moldova, and Ukraine, and assessments done over 2016-2017 in Nigeria, Ethiopia, Lesotho, Belarus, Turkey, Chile, and on the European Union tax harmonization process. Work is currently underway or being initiated in the Indonesia, Sierra Leone, China, and Montenegro. In addition, the program supports knowledge exchange, including peer-to-peer advice and support, among selected countries on the economics of tobacco control (for example, through the Joint Learning Network, which includes more than 30 countries).

The preparation of a Tobacco Taxation Module as part of WBG/IMF Tax Policy Assessment Framework (TPAF) is underway as part of a new WBG/IMF initiative launched ahead of the Financing for Development Conference in Addis Ababa, held in July 2015, to help member countries strengthen their tax systems. One of the pillars of the initiative includes the development of “improved diagnostic tools to help member countries evaluate and strengthen their tax policies.” Building on their collective expertise, the Bretton Woods Institutions (BWIs) aim to play a fuller role in enabling all of their member countries to assess tax policy performance in order to identify priority tax policy reforms, and design the requisite support for their implementation. The TPAF is a diagnostic framework to provide systematic and structured assessment of a country’s tax policy system, and to develop options for improving such system given a set of policy objectives.

More specifically, the program assists government agencies in developing capacity to assess the health and social costs of tobacco use, and design, enact, administer and monitor tobacco taxation policies. Enhanced capacity will enable countries to increase prices and reduce tobacco use, taking into account the macro-economic and fiscal situation of each country, tax laws, and existing tax administration structure and processes. This process includes assessments and discussions related to fiscal revenues and allocation; smoking patterns and taxes at country level; and socio-economic and health impacts of increasing tobacco tax rates, under different tax policy scenarios, and including impacts on employment, smuggling and other likely impacts of tobacco tax reforms.

The Bank team engaged in this program is multi-sectoral, and includes experts in health, governance, and macro-economics and financial management. Initial discussions are being held to mobilize knowledge and expertise from the International Monetary Fund’s Fiscal Affairs team. The Bank team is also working closely with other international partners, such as the World Health Organization and the Campaign for Tobacco-Free Kids.

The Bank’s Tobacco Control Program is implemented through a multi-donor trust fund financed by the Bill & Melinda Gates Foundation and the Bloomberg Philanthropies. These donors take part in governance of the trust fund and participate in the selection of priority countries included for support under the program.

Joint Learning Network Module: The Joint Learning Network (JLN), connects practitioners and policymakers across countries, facilitating peer-to-peer learning and sharing of knowledge and experience. As part of the Bank’s program, the network is currently developing a Tobacco Tax and Illicit Trade on Tobacco Module targeting member countries in Asia, Africa, Latin American and the Caribbean, and Europe, as well as a diverse group of international, regional, and local partners. The module is expected to focus on tobacco taxation, tax administration, and illicit trade control measures.

In 1991 the World Bank adopted a mandatory operational policy not to lend, invest in, or guarantee investments or loans for tobacco production, processing, or marketing. The Bank’s activities in the health sector discourage the use of tobacco products.

Why the emphasis on tobacco taxation?

Raising taxes on tobacco products is one of the most cost-effective measures to reduce consumption of products that increase mortality , while also generating substantial domestic revenue for health and other essential programs—investments that benefit the entire population. Given this, the World Bank Group Tobacco Control Program gives priority attention to tobacco taxation.

Findings in the 2015 WHO Report on the Global Tobacco Epidemic show that while only 33 countries impose taxes that constitute more than 75% of the retail price of a pack of cigarettes—the taxation level recommended to have an impact on consumption —most countries that do tax tobacco products have extremely low tax rates. And some countries do not have a special tax on tobacco products at all.

Given this situation, the World Bank Group’s program supports governments to look at accumulated country evidence and use tax measures to increase the retail price of tobacco products as one of the best available public health policy measures.

Some important lessons from international experience about how to effectively implement tobacco taxation policy to achieve public health objectives can be adopted and adapted in policy dialogue and operational support to countries. Such lessons include:

  • While nearly all countries tax tobacco products, an excise tax is the most important type of tobacco tax, since it applies uniquely to tobacco products and raises prices relative to prices for other goods and services.
  • Simpler tobacco tax structures are more effective than complex ones, since tiered tax structures are difficult to administer and can undermine the health and revenue impacts of tobacco excise taxes.
  • Use of specific excise taxes enhances the impact of tobacco taxation on public health by reducing price gaps between premium and lower-priced alternatives, which limits opportunities for users to switch to less-expensive brands in response to tax increases. Taxing all tobacco products comparably reduces incentives for substitution.
  • Ad valorem taxes are difficult to implement and weaken tax policy impact. Since they are levied as a percentage of price, companies have greater opportunities to avoid higher taxes and preserve or grow the size of their market by manufacturing and selling lower-priced brands. This also makes government tax revenues more dependent on industry pricing strategies and increases the uncertainty of the tobacco tax revenue stream.
  • Specific excise taxes need to be adjusted for inflation to remain effective.
  • Tax increases should reduce the affordability of tobacco products. In many countries, where incomes and purchasing power are growing rapidly, large price increases are required to offset growth in real incomes.
  • Strong tax administration is critical to minimize tax avoidance and tax evasion, to ensure that tobacco tax increases lead to higher tobacco product prices and tax revenues, as well as reductions in tobacco use and its negative health consequences.
  • Regional agreements on tobacco taxation can be effective in reducing cross-border tax and price differentials and in minimizing opportunities for individual tax avoidance and larger scale illicit trade.

For more information, please contact:

Patricio V. Marquez

Lead Public Health Specialist

World Bank Group Health, Population and Nutrition Global Practice

Email address: pmarquez@worldbank.org

Blanca Moreno-Dodson

Lead Economist

World Bank Group Macro Economics and Fiscal Management Global Practice

bmorenododson@worldbank.org