Tobacco taxes

Percent

Identifying the burden of different taxes on the price of tobacco and nicotine products.

The different types of indirect/consumption taxes calculated as a percentage of the price of tobacco and nicotine products comprise: excise taxes (specific and/or ad valorem), value-added taxes/sales taxes, import duties and other taxes.

Amongst the different types of consumption taxes applied, excise taxes are preferred from a public health perspective as they can be used to raise the relative price of tobacco and nicotine products compared to other products and services in the economy, participating in reducing their affordability.

Below is a description of each of the taxes considered:

1. Specific excise taxes: a specific excise tax is a tax on a selected good produced for sale within a country or imported and sold in that country. In general, the tax is collected from the manufacturer or at the point of entry into the country by the importer, in addition to import duties. These taxes come in the form of an amount per stick, pack, per 1000 sticks, or per kilogram. Example: US$ 1.50 per pack of 20 cigarettes.
2. Ad valorem excise taxes: an ad valorem excise tax is a tax on a selected good produced for sale within a country or imported and sold in that country. In general, the tax is collected from the manufacturer or at the point of entry into the country by the importer, in addition to import duties. These taxes come in the form of a percentage of the value of a transaction between two independent entities at some point of the production/distribution chain; ad valorem taxes are generally applied to the value of the transactions between the manufacturer and the retailer/wholesaler. Example: 60% of the manufacturer’s price.
3. Value added taxes and sales taxes: the value-added tax (VAT) is a “multi-stage” tax on all consumer goods and services applied proportionally to the price the consumer pays for a product. Although manufacturers and wholesalers also participate in the administration and payment of the tax all along the manufacturing/distribution chain, they are all reimbursed through a tax credit system, so that the only entity who pays in the end is the final consumer. Most countries that impose a VAT do so on a base that includes any excise tax and customs duty. Example: VAT representing 10% of the retail price.
Some countries, however, impose sales taxes instead. Unlike VAT, sales taxes are generally levied at the point of retail on the total value of goods and services purchased. For the purposes of the report, care was taken to ensure the VAT and/or sales tax shares were computed in accordance with country-specific rules.
4. Import duties: an import duty is a tax on a selected good imported into a country to be consumed in that country (i.e. the goods are not in transit to another country). In general, import duties are collected from the importer at the point of entry into the country. These taxes can be either specific or ad valorem. Specific import duties are applied in the same way as specific excise taxes (e.g. an amount per 1000 sticks). Ad valorem import duties are generally applied to the CIF (cost, insurance, freight) value, i.e. the value of the unloaded consignment that includes the cost of the product itself, insurance and transport and unloading. Example: 50% import duty levied on CIF.
5. Other taxes: Information was also collected on any other tax that is not called an excise tax, import duty, VAT or sales tax, but that applies to either the quantity of tobacco or to the value of a transaction of a tobacco product, with as much detail as possible regarding what is taxed and how the base is defined.
6. Total taxes: are the sum of all taxes listed above.

• Specific excise taxes
• Ad valorem excise taxes
• Value added taxes and sales taxes
• Import duties
• Other taxes
• Total tax

Above taxes as percent of the following:

• Price of the most sold brand of cigarettes (pack of 20 sticks),
• Price of the most sold brand of the most sold type of other smoked tobacco product (20 grams or 1 piece, as indicated),
• Price of the most sold brand of the most sold type of smokeless tobacco product (20 grams),
• Price of the most sold brand of heated tobacco product HTP (20 sticks),
• Price of the cheapest brand of e-liquid of a closed rechargeable electronic nicotine delivery or non-nicotine delivery systems ENDS/ENNDS (1 ml),
• Price of the cheapest brand of e-liquid of a closed disposable ENDS/ENNDS system (1 ml),
• Price of the cheapest brand of e-liquid of an open ENDS/ENNDS system (10 ml).

Excise tax rates reported were converted as a percent of the prices reported and standardized for 20 sticks of cigarettes and HTPs, 20 grams of smokeless tobacco and some types of other smoked tobacco (for other smoked tobacco like cigar, the quantity was standardized to 1 piece), 1 ml of e-liquid of closed rechargeable and disposable ENDS/ENNDS systems and 10 ml of e-liquid of an open ENDS/ENNDS system.

N/A

N/A

Biennial

Biennial

perucica@who.int

Anne-Marie Perucic

Percentage

Percentages depend in many cases (especially when excise is specific) on the level of price reported for tobacco or nicotine product. If the price is not correctly reported, the estimated proportion may be biased.