Higher tax on cigarettes: Won't save lives, will just fill govt coffers

In a bid to bring down smoking in India, Health Minister Dr Harsh Vardhan has said that tax on cigarettes will be increased in the country. While the price of each stick had been increased on at least two occasions last year, this year, the health minister wants to hike the price by Rs 2 to Rs 3.5 per stick. The Economic Times quoted Dr Harsh Vardhan as saying, “Raising the proportion of specific tax on cigarettes as a percentage of their retail price from about 45 percent to over 60 percent of the retail price of cigarettes would conservatively lead to about three million smokers quitting and nearly three million children not starting.” [caption id=“attachment_1610719” align=“alignleft” width=“380”] Representational image. AFP[/caption] In the US, such taxation has been used often to reduce consumption of cigarettes. A study by the American Journal of Public Health shows that it indeed had an effect and reduced smoking among people. The journal found:

“State cigarette tax increases were associated with an average decline in cigarette consumption of three cigarette packs per capita (about 2.4%). Larger tax increases were associated with larger declines in consumption. Raising state cigarette taxes appears to be an effective public health intervention that can reduce cigarette consumption and its associated health consequences.”

Will such a tax increase do the same in India?  An article in The Hindu points out that while it may reduce smoking among citizens in developed nations, it does not make a drastic difference in countries like India. The article says that  “tobacco companies have remarkable ingenuity and lobbying to make sure their customer base remains intact even when taxes are raised”. “After all, high tax rates lead to reduced consumption, and they are fully aware of it. Hence, the tax structure for tobacco products in India has been made complex and provides much leeway for companies to escape the brunt of any tax hike.” Since this tax hike will hardly deter smokers to completely give up smoking, it will only mean one thing — greater revenue for the government. The Economic Times reports : “In a letter sent on Thursday, Vardhan urged finance minister Arun Jaitley to raise tax on retail price of cigarettes from 45 percent to over 60 percent in the upcoming budget. This, he said, would add Rs 3,800 crore to the government’s revenue and save at least four million lives. Although the previous government had raised tax on cigarettes by about 19 percent in February 2013, the increase was too little to lower consumption, Vardhan said.”