Increase tobacco tax to heal the economy and people’s health

Increase tobacco tax to heal the economy and people’s health

John Rijo

Many smokers are also in favor of tax hikes because they want to kick the habit.

As it prepares for the next budget, the Union Government will look for ways to generate more revenue to heal the Covid-19 battered economy. But he must be careful that his measures do not add to the woes of the common man already reeling from Covid-induced health worries, inflation and soaring commodity prices in the face of food cuts. wages and widespread job losses.

In such a grim scenario, one of the areas the government can explore is to raise the tax on “products of sin” – cigarettes, e-cigarettes, cigars and smokeless tobacco produced by big tobacco. blatantly at the cost of young people’s lives. It also weighs on the economy.

Since 2017, when the GST came into force, the tobacco industry has been enjoying an almost extended duty-free season. After the GST, there has been no major tax increase on tobacco products in the past four years, which makes tobacco products in India more affordable for the common man.

In India, the tax burden on bidis, cigarettes and smokeless tobacco averages 22%, 53% and 64% respectively in 2021, while the World Health Organization (WHO) recommends a tax of at least 75% for each tobacco product. Obviously, we are well below the WHO recommended tax slab.

Tobacco use is known to be the cause of several non-communicable diseases (NCDs) such as cancer, cardiovascular disease, diabetes and chronic lung disease. In India, about 13,000 deaths each year are attributable to tobacco consumption. India also bears an annual economic cost of more than Rs 1,77,000 crore spent by people on the treatment of diseases caused by tobacco as well as the monetary value of premature death due to tobacco consumption. It accounts for more than one percent of India’s GDP. The economic burden due to bidi consumption is also estimated at Rs 80,000 crore. This burden is likely to increase significantly in the near future, as tobacco users have a higher risk of contracting coronavirus infection.

Over 28% of adults over the age of 15 and 8.5% of students aged 13-15 use tobacco in some form, making India the second largest tobacco user in the world . Experts have confirmed that smokers are more likely to develop severe symptoms or die from a Covid infection because it primarily attacks the lungs.

Therefore, if taxes are not raised immediately and significantly, some of the hard-won gains in reducing tobacco consumption made in recent years, as evidenced by the World Tobacco Survey in (GATS) 2009-17, could be reversed at the cost of the economy and public health. The GATS showed a 17% reduction in tobacco consumption. If we do not increase taxes significantly, the use of tobacco products, especially among young people, will increase.

It is therefore necessary to increase taxes on tobacco products as soon as possible in order to discourage young people from using these products which are dangerous to health.

Studies and surveys conducted in several countries reveal that many tobacco users are also in favor of tax increases because they wish to quit their adopted habit in an unwanted way or due to peer pressure. In these times of pandemic when we need significant revenues to improve health infrastructures, heavily taxing tobacco products is ideal to discourage its consumption.

Imposing a tobacco tax will instead present the government’s image as “pro-poor”. Because, in India, tobacco consumption is generally higher among the poor and the middle classes who are more prone to tobacco-related diseases and who cannot afford medical expenses. Imposing a tax will help the poor save on tobacco products.

Nor is levying a tobacco tax anti-farmer, as farmers have little say in the profits made from the sale of tobacco products. For example, out of 100 rupees earned on tobacco products, less than 3 rupees goes to farmers. In fact, when you increase taxes, the reduction in consumption does not happen instantly, it takes time. This window should be used by the government to allow tobacco growers and others to find other sources of short-term income. Notably, there are about 48 lakh bidi workers in the country.

The government has a plethora of tax options available. Such as National Calamity Contingent Duty (NCCD), Compensation Cess and Excise Duty which were reintroduced for tobacco taxation two years ago. These can be used exclusively by the government to increase the prices of tobacco products.

Therefore, the tobacco tax could be a win-win formula. The ensuing budget session offers a perfect opportunity for the government to move in this direction for the improvement of the country’s economy and the health of compatriots.

(The author is a Health Economist and Adjunct Professor, Rajagiri College of Social Sciences, Kochi.) Dailypioneer

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