Raising tobacco taxes will not cause loss of revenue in India: new study

Raising tobacco taxes will not cause loss of revenue in India: new study

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The tax on beedis can be increased to Rs. 100 per 1000 sticks compared with the current Rs. 14 and the tax on an average cigarette can be increased to Rs. 3.5 per stick without any fear of losing revenue, according to a new study.

However in the Indian Budget 2008-2009, excise duty on both filter and non-filter cigarettes was brought on par by applying higher rates on non-filter cigarettes. However before the Finance Minister P Chidambaram announced the budget, this is what Dr Ramadoss (Health and family welfare minister) had said: "We have requested the finance minister to increase the taxes on (tobacco) products so that the alarming figures of its consumption as compared to other countries can come down."

The current system of taxing cigarettes in India based on the presence of filters and the length of cigarettes has no justification on health grounds, and should be abolished, if reducing tobacco consumption and the consequent disease burden is one of the objectives of tobacco taxation policy, argues the researcher. Attempts to regulate tobacco use without effecting significant tax increases on beedis may not produce desired results, adds the researcher.

Interestingly 85% of the tobacco tax comes from cigarettes (15% of tobacco consumption in India is in form of cigarettes) and rest of the 15% tax comes from the non-cigarette tobacco productsin India (about 85% of tobacco consumption is non-cigarette forms of tobacco products like gutkha, beedis etc).

Article 6 of the global tobacco treaty - FCTC (Framework Convention on Tobacco Control) to which India is a party by signing and then ratifying the FCTC, also supports price and tax measures to reduce the demand for tobacco. just to recall, Article 6 of FCTC says:

"1. The Parties recognize that price and tax measures are an effective and important means of reducing tobacco consumption by various segments of the population, in particular young persons.

2. Without prejudice to the sovereign right of the Parties to determine and establish their taxation policies, each Party should take account of its national health objectives concerning
tobacco control and adopt or maintain, as appropriate, measures which may include:

(a) implementing tax policies and, where appropriate, price policies, on tobacco products so as to contribute to the health objectives aimed at reducing tobacco consumption; and

(b) prohibiting or restricting, as appropriate, sales to and/or importations by international travellers of tax- and duty-free tobacco products.

3. The Parties shall provide rates of taxation for tobacco products and trends in tobacco consumption in their periodic reports to the Conference of the Parties, in accordance with Article 21."

Let us hope that the Indian policy makers keep-their-promises and prove true vanguards of public health and interests.