Can tobacco excise taxes be a boon for NCD financing?

Governments need to put more effort in implementing one of the World Health Organization Framework Convention on Tobacco Control’s proven measures to reduce demand and deaths from tobacco use — levying high taxes on tobacco products.

Only 33 countries have so far raised taxes on a pack of cigarettes to the suggested more than 75 percent of retail price, according to a new WHO report launched this week.

This means only 10 percent of the world’s population is benefiting from this anti-tobacco strategy, which aims to lower the number of individuals at risk of tobacco-related diseases, such as lung cancer and heart ailments.

But it also dashes hopes for greater supplemental financing for tobacco control, and more broadly, noncommunicable diseases, whose burden is increasing worldwide but whose share of global development assistance for health is the smallest.

NCD finance

From receiving a meager $160 million in 2000, health assistance tackling NCDs grew 282 percent to $611 million in 2014, according to preliminary estimates by the Institute for Health Metrics and Evaluation in its latest report on global health financing.

But as Devex reported recently, that’s still just a fraction of global health financing, accounting for 1.7 percent of the $35.9 billion spent last year.

This poses challenges for those working to address the increasing burden of NCDs, which in many sub-Saharan countries contribute more than 30 percent to total deaths, as per analysis of WHO’s country-level data.

But even if the future of NCD financing might seem bright because of its inclusion in the current draft of the sustainable development goals, current trends suggest funding might not grow quickly enough to reach $11.4 billion — what WHO estimates would be needed annually to tackle NCDs in low- and middle-income countries.

The promise of taxes

Given this dilemma, NCD control advocates have been on the lookout for innovative models of finance — including levying taxes on products like alcohol and tobacco.

To some extent, taxes levied on tobacco products have yielded additional finance for NCDs. A cigarette pack in Algeria, for instance, carries a 38.14 percent tax. From the collected amount, 2 Algerian dinars (2 cents) are earmarked for cancer control. In Costa Rica, nearly all of the 58.26 percent mixed excise tax levied on cigarette packs — which for premium brands like Marlboro amounts to 990.42 Costa Rican colones ($1.80) — goes to the prevention and treatment of diseases related to tobacco use, such as cancer, and those resulting from harmful use of alcohol. A small portion goes to sports programs.

All revenues from taxes on tobacco products in Nepal also mainly finance NCD prevention and treatment activities. In India, a specific amount levied on bidis — small, hand-rolled cigarettes — is channeled to a welfare fund for bidis workers, with a portion going to their medical care. Iran meanwhile allocates up to 2 percent of taxes collected on tobacco products to support activities on tobacco control. Panama for its part distributes 50 percent of its tobacco tax revenues to relevant government institutions, such as the National Institute of Oncology, the Ministry of Health and Customs — to fight illicit tobacco trade in the country.

Small share

Most countries however channel revenue collected from tobacco taxes to their wider health programs, their own health funds or to the country’s health ministry.

Advocates welcome this, especially when part of it adds to efforts for universal health coverage, as in the case of the Philippines, where 80 percent of revenues from the country’s sin taxes this year is earmarked for health insurance subsidy.

In 2014, the country’s Philippine Health Insurance Corp. launched its Z benefit package, which covers some cancer diseases and open heart surgeries. The Department of Health’s 2014 budget also showed a 729 percent increase in its budget in tackling NCDs because of sin tax revenues.

But having no clear strategy on how to spend the additional funding, and not including health systems as part of the goal pose the danger of countries focusing too much on specific diseases, leaving little to no room for NCDs. In Ivory Coast, a tax of 5 percent goes to the country’s AIDS Solidarity Fund, and an additional 2 percent to sports. It did not report any funding channeled for universal health care or NCD control, prevention and treatment.

Another issue is that none of the limited number of countries with high tax rates for tobacco products are in the low-income category. While understandable given that low-income countries and fragile states are already struggling to collect taxes to begin with, this underlines the need to boost efforts to help such nations improve tax collection and administration, including building the technical and human resource capacity of revenue and customs authorities.

In March, Bloomberg Philanthropies and the Bill & Melinda Gates Foundation jointly launched an Anti-Tobacco Trade Litigation Fund to support low- and middle-income countries facing lawsuits that prevent them from passing laws to control tobacco use.

To read additional content on global health, go to Focus On: Global Health in partnership with Johnson & Johnson.