The government of Kerala raised taxes on cigarettes from 12.5% to 15%; and pan masala from 22% to 22.5% in the state Budget this year. It’s certainly a commendable move, expected to fetch the treasury additional revenues of Rs 76 crore every year.
But it’s hardly the quantum taxation leap health experts have been clamouring for in the campaign to wean people away from tobacco and prevent millions of avoidable deaths.
Kerala has a long way to go even in relative terms, if we look at how other states are faring on tobacco taxation. Jammu and Kashmir raised taxes on cigarette and tobacco products from 25% to 30% in the Budget this year.
Maharashtra has, for the first time, introduced VAT on bidis – a deadly tobacco product left untouched by the Kerala government in Budget 2012. A duty of 12.5% has been introduced for bidis in Maharashtra.
Madhya Pradesh has nearly tripled the tax on bidis – from 5% to 13%. It has also become the first state in India to ban the sale of gutka and has ordered manufacturers to shut down production facilities in the state.
Rajasthan, meanwhile, has leapt ahead of the pack by increasing tax on all tobacco products from an already impressive 40% to 50% this year.
In neighbouring Tamil Nadu cigarettes are taxed at 20% of the retail price. A carton of cigarettes has the same MRP on both sides of the border, which means the Kerala government which taxes cigarettes at 15% generates less revenue than Tamil Nadu on the same product. It also means that manufacturers make more money on a pack of cigarettes sold in Kerala than in Tamil Nadu – a dangerous incentive.
Studies have shown time and again that increased taxation is an effective deterrent to smoking and tobacco consumption. “Increasing the retail price of tobacco through higher taxes is the single most effective way to decrease consumption and encourage tobacco users to quit,” says the World Health Organisation.
A study by the Toronto-based Centre for Global Health Research estimates that raising tax in India from 7% to 33% on bidis and from 43% to 58% on cigarettes would lead to 14 million smokers quitting and 27 million children never starting to smoke.
Researchers say it will be the equivalent of “69 million years of saved healthy life over the next 40 years”.
India is the world’s second largest tobacco user after China, the WHO’s Global Adult Tobacco Survey 2009-10 found. According to the CGHR experts this “relatively high tobacco consumption is partly the result of historically low or non-existent taxes on bidis, and an inefficient, complex taxation system on cigarettes”.
The study led by Prof Prabhat Jha of the University of Toronto and published in the October issue of Economic & Political Weekly points to the current “chaotic tax structure” in India. The authors argue that it has led to, among other things, higher tobacco consumption; loopholes that allow manufacturers to counter the impact of higher taxes; increased corruption and tax evasion; and difficulty adjusting for income growth and inflation.
They recommend implementing a tobacco control strategy that uses research and policy regulation to curb consumption, and adopting higher, more effective levels of taxation on bidis and cigarettes that adjust for annual inflation.
Reforms aimed at creating a “rational system of taxation” that involves periodic adjustment for inflation will go a long way in tackling corruption, increasing revenues and cutting smoking deaths, they argue.
“Modest action on tobacco taxes in India might well save millions of lives,” the report concludes.
Based on an earlier study by the John Hopkins Bloomberg School of Public Health, raising VAT on cigarettes, bidis and smokeless tobacco to 25% could prevent an estimated 150,400 premature deaths in Kerala.
Image adapted from http://theworldisenough.blogspot.com
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