The WHO best practices are that taxes should constitute 65% - 70% of the retail price of tobacco products and Rajasthan, setting an example for Kerala and the rest of the country, has raised taxes on all tobacco products to 65% in the 2013-14 Budget presented by Hon'ble Chief Minister Shri Ashok Gehlot who also holds the Finance Portfolio on 6 March.
In the process, the state will be able to save an additional 340,000 as tobacco users quit and new users do not enter the market due to the increased price of tobacco, according to a modelling by Johns Hopkins University Bloomberg School of Public Health.
Rajasthan clearly testifies the theoretical framework that increasing price of tobacco through tax increases will decrease its consumption, save lives and raise tax revenue. Since 2010, Rajasthan has consistently raised taxes across all products from 20% to 40% in 2011-12 and to 50% in 2012-13.
A study analysing the immediate impact of the 2011-12 tax increase found that increased taxes led to 8% and 6.2% reduction in users’ consumption of cigarettes and beedis respectively. During the same year, Rajasthan tax earnings from cigarettes were Rs 139.23 crores and Rs 312.08 crores from beedis.
The Johns Hopkins modelling has it that VAT tax increases in Rajasthan in fiscal year 2010-11 alone has saved over an estimated 567,000 lives and the increase to a VAT of 50% in fiscal year 2011-12 another additional 243,000.
In Kerala, cigarettes are taxed at 15%, while beedis are not taxed at all. Tobacco use causes over 40% of cancers in Kerala.
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