SDG 3: Good Health and Well-being | SDG 17: Partnerships for the Goals
Ministry of Health and Family Welfare | Ministry of Finance
The WHO Technical Manual on Tobacco Tax Policy and Administration provides comprehensive, evidence-based guidance on designing, implementing, and enforcing effective tobacco excise taxes across over 195 countries to reduce consumption, save lives, and boost revenues while countering industry tactics.
Key Global Policy Mandates for Effective Tobacco Taxation:
Tax Burden Target: The manual mandates that the total tax burden on tobacco products should be at least 75% of the retail price.
Optimal Tax Structure: The most effective policy instrument is a uniform specific excise tax (a fixed amount per unit, like per stick/gram).
Benefit: Specific excise taxes raise prices most effectively, narrow brand price gaps, and discourage consumers from “down-trading” (switching to cheaper variants).
Avoidance: Policymakers should avoid tiered or ad valorem tax systems, which are prone to industry manipulation, undervaluation, and the proliferation of cheap varieties.
Policy Complements: Taxes should be automatically indexed to keep pace with inflation and income growth. Enforcement efforts must include banning single-stick sales, promotions, and small packs.
Illicit Trade Prevention: Administration must be strengthened by implementing a Track and Trace system, stamps, licensing, and harsh penalties (e.g., seizures, jail) to combat illicit trade and tax evasion.
A specific excise tax is the most recommended form of tobacco taxation where the tax is levied as a fixed monetary amount per unit of the product (e.g., per stick of cigarette or per gram of smokeless tobacco). This differs from an ad valorem tax (a percentage of the price) and is preferred because it immediately reduces the affordability of all products, especially low-cost variants.
India-Relevant Details
India exemplifies several challenges and opportunities highlighted in the manual:
Product-Specific Challenge: The market is dominated by low-cost products like Bidis (hand-rolled, cheap) and smokeless tobacco, particularly in low-income states (e.g., Assam, Odisha) where adult use exceeds 30%.
Tax Disparity: The excise taxes and prices for Bidis (~₹3.8/pack) and smokeless tobacco (~₹12.8/20g) are far lower than those for cigarettes (~₹54.9/pack), driving substitution, high prevalence, and revenue loss.
Industry Tactics: Industry exploits lower tiers by launching cheap “microcigarettes” (e.g., Gold Flake Century, <60mm) to expand the cheapest market segment despite tax hikes on standard cigarettes.
Equity and Administration: Taxes on tobacco are considered progressive when accounting for health gains (reducing tobacco-attributable illnesses among the poor). However, current administration suffers from weaknesses like single-stick/bidi sales, and stronger enforcement is needed against small-scale/handmade production.
Policy Relevance
This WHO manual provides a compelling and evidence-based policy mandate for India’s Ministry of Finance and health regulators. To achieve public health goals and secure revenues, future policy must prioritize a structural shift towards uniform specific excise taxes across all products (cigarettes, bidis, smokeless) and link them to inflation/income. This must be accompanied by enhanced tracking and enforcement to curb both industry evasion tactics (like microcigarettes) and illicit trade, thereby advancing health equity and aligning India’s fiscal policy with the WHO Framework Convention on Tobacco Control (FCTC).
Follow the full news here: WHO Technical Manual on Tobacco Tax Policy and Administration