This chapter finds that LAC countries have to increase their efforts to reduce tobacco use prevalence through the introduction of tobacco tax reforms. Countries introduced a wide range of tobacco excise tax reforms before 2011, but reform progress has been slower since then. In order to advance reform, policy makers have to take account of the responses of tobacco businesses to tobacco tax policy and, if necessary, introduce additional measures to maintain the effectiveness of tobacco excise taxes. Countries have to align their tobacco tax administration and tobacco tax design, strengthen the coherence between tobacco excise and income tax policy, and improve domestic and regional tobacco tax cooperation.
Tobacco Taxation in Latin America and the Caribbean
A Call for Tobacco Tax Reform
Abstract
Since 2000, all LAC countries have implemented at least one tobacco excise tax reform. Since 2000, the 18 LAC countries covered in this chapter have adopted 93 tobacco excise tax reforms (changes in the tobacco excise tax rates, and/or the introduction of indexation mechanisms or tax floors, and/or adjustments to the excise tax base) (Figure 5.1). These reforms typically entail the enactment of new laws or decrees.
Number of tobacco excise tax reform measures adopted in LAC countries, 2000 – 2022
Note: The following countries are included: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay. Venezuela has been excluded due to missing data. Tobacco excise tax reform refers to changes in the tobacco excise tax rates, and/or the introduction of indexation mechanisms or tax floors, and/or adjustments to the excise tax base. These reforms typically entail the enactment of new laws or decrees. The figure does not refer to recurrent tax changes that result from the indexation for inflation of tax brackets and price floors. Tobacco excise tax reforms do not include the introduction of sale regulations (BP12, see Box 4.1 in Chapter 4). The year reflects the enactment of new legislation, not when the tobacco tax reform is implemented. Bans on new tobacco and nicotine products are also included in the figure to reflect country’s efforts aligned with BP5 (“taxable products”, see Box 4.1 in Chapter 4): Argentina, Brazil, Mexico, Nicaragua, Panama and Uruguay.
Source: Based on national legislation listed in the country profiles available in Chapter 6.
Many tobacco excise tax reforms took place before 2011. The number of tobacco excise tax reforms peaked in 2004 with the ratification of the WHO Framework Convention on Tobacco Control (WHO FCTC) by many LAC countries (Sandoval et al., 2022[1]). Guiding principles for the implementation of Article 6 of the WHO FCTC on price and tax measures to reduce the demand for tobacco helped countries in implementing tobacco excise tax reforms. It peaked again in 2009-2010 following the global financial crisis (Figure 5.1). However, the COVID-19 pandemic did not (yet) result in a new wave of tobacco tax reforms.
The most significant changes in tobacco tax policy design in LAC took place following the global financial crisis (Figure 5.2). Between 2009 and 2011, countries have implemented reforms that follow the WHO tobacco tax design best practices. Four countries moved from an ad valorem to a specific tax structure (Nicaragua 2009, Peru 2010, Honduras 2010, and Ecuador 2011) (BP3). Two countries moved from an ad valorem to a mixed tax structure (Mexico 2009, Chile 2010), although two countries moved from a specific only to a mixed excise tax structure (Colombia 2010, Brazil 2011). Specific excise taxes started to be levied on single sticks of tobacco products (BP7). Chile (2010), Ecuador (2011), Honduras (2010) and Nicaragua (2009) started indexing specific excises for inflation (BP10). Tiered taxation was widely abolished in 2010 (BP9), except in Bolivia where tiered rates are still in force for cigarettes, and in Guatemala and Mexico for non-cigarette tobacco products. Excise tax rates were gradually aligned (BP8) (Figure 5.2, Panel B), although excise tax rates still vary significantly across tobacco products in LAC (Figure 4.1 in Chapter 4 and Table 3.2 in Chapter 3). The sales of some types of new tobacco and nicotine products have been banned in Argentina (2011), Brazil (2009), and Uruguay (2009) (Figure 5.2, Panel B).
The pace and scale of tobacco excise tax reform in LAC has somewhat decreased since 2012. Between 2012 and 2022, 31 tobacco tax reforms were adopted, which is significantly below the 62 tobacco tax reforms that were implemented between 2000 and 2011 (Figure 5.1). Moreover, the tobacco tax reforms that were implemented were less wide in scope. Between 2000 and 2011, 28 excise tax increases were enacted that allowed some countries to reach at least 50% of tobacco excise taxes in the tobacco tax mix by 2022 (BP2) (Figure 5.2, Panel A). Since 2012, the number of such tax increases has been more limited (15 measures), while the increases in statutory tax rates have also been more modest than in the previous period (see Box 5.1). Over the last decade, only one country shifted from an ad valorem to a specific tax structure (Bolivia 2017), and one country from an ad valorem to a mixed tax structure (Costa Rica 2012) (BP3) (Figure 5.2, Panel C). After 2018, tobacco excise tax reforms primarily focused on indexing specific taxes for inflation (BP10) (Figure 5.2, Panel C). Regarding new tobacco and nicotine products, their sales have been banned in Mexico (2022), Nicaragua (ENDS and ENNDS only, 2021), Panama (2022) while they started to be taxed in Colombia (HTPs only, 2018), Costa Rica (2022), Ecuador (2019), Paraguay (HTPs only, 2019) and Peru (HTPs only, 2019) (BP5) (Figure 5.2, Panel B).
Cumulated number of tobacco tax reforms at moderate/complete level of compliance with WHO best practices
Note: LAC countries included in the figure are Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay. Venezuela has been excluded due to missing data. The number of tobacco tax reforms is cumulative, starting from zero for the base year (2000) and showing, for each year, the total number of reforms adopted since the base year. For an explanation of the criteria that are used to classify and evaluate tobacco tax reforms’ alignment with the WHO tobacco tax policy best practices, see Box 4.2, Table 4.A.1 and Table 4.A.2 in Chapter 4. Annex Table 5.A.1 provides country specific information on best practices implementation overtime. BP1 (affordability) and BP12 (sale regulations) have not been included in the figure because affordability is related to a wide range of tax and non-tax measures and the regulation of sales is not directly related to tobacco tax design. Progress on BP4 has been comparatively slower than other best practices over the 2000 – 2022 period because traditional tobacco products were already taxed in most countries prior to the year 2000. Tobacco tax reforms aligned with BP5 correspond to the ban of sales in the following countries: Argentina, Brazil, Mexico, Nicaragua, Panama and Uruguay.
Source: OECD based on national legislation listed in the country profiles available in Chapter 6; WHO technical manual on tobacco tax policy and administration (WHO, 2021[2]); WHO report on the global tobacco epidemic (WHO, 2023[3]).
A comparison of statutory tobacco excise tax rates over the 2008-2022 period shows a slowdown in tax rate increases in recent years.
Between 2008 and 2015, ad valorem excise tax rates increased in five countries (Figure 5.3, Panel A). The most significant ad valorem tax rate increase took place in Panama, which raised the tax rate from 32.5% to 100% in 2009 on the retail price suggested by the manufacturer/importer net of the VAT. The introduction of a specific rate in Chile in 2010 was accompanied by a reduction in the ad valorem excise tax rate between 2008 and 2015, while in Costa Rica and Mexico the introduction of a specific excise tax (in 2012 and 2009, respectively) did not result in a reduction of the ad valorem tax rates. Between 2015 and 2022, ad valorem tax rates increased slightly in Argentina, Brazil, and Paraguay.
Increases in the amount of the specific taxes have been modest in recent years (Figure 5.3, Panel B). In the Dominican Republic, El Salvador, and Jamaica, the tax increases were larger between 2008 and 2015 than they were between 2015 and 2022. Following the introduction of a specific tax in the period 2009-2012, subsequent increases in the specific tax on cigarettes in Chile, Costa Rica, Honduras and Mexico have been modest and reflect only the increase with inflation as a result of indexation. In Brazil, the absence of indexation for inflation of the specific tax since 2016 has led to its relative drop in real value. In contrast, in Colombia, Nicaragua, Peru and Uruguay, the increases in the specific taxes have been more significant between 2015 and 2022 than in other countries that levy a specific excise tax on cigarettes.
Note: Countries are grouped according to the excise tax design set in 2008. Specific tax for Brazil (BRA) and Colombia (COL) in 2008 correspond to the highest tiered rate, as well as for Bolivia (BOL) in 2022. Specific taxes in Panel B are converted into USD PPP with the implied PPP conversion rate available in the IMF World Economic Outlook Database (October 2023). Argentina, Guatemala, Panama and Paraguay do not levy a specific tax. Jamaica and Uruguay do not levy an ad valorem excise tax. Specific excise taxes have been standardized to a 20-unit pack to allow the comparison across countries with different tax bases.
Source: National legislation listed in the country profile of each country (Chapter 6); IMF World Economic Outlook Database (IMF, 2023[4]).
Tobacco tax reforms have gradually widened the relative wedge between pre-tax and retail prices over time across different tobacco tax structures. The panels in Figure 5.4 present the average change in pre-tax and retail prices over time for different tax structures, taking the pre-tax and retail price in 2008 as the base. The difference between pre-tax and retail price levels provides an indication about the impact of tobacco taxes on prices (Partos et al., 2020[5]; Sheikh, Branston and Gilmore, 2021[6]). However, the price evolution in Figure 5.4 does not separately identify the impact of a tobacco tax reform and the industry’s response to the reform (e.g. tobacco producers may have lowered pre-tax prices in response to a tax increase, which would have widened the gap) so the data needs to be interpreted with caution. The country notes of this report provide more insight on country specific trends (see Chapter 6).
Percentage change from base year, 2008 – 2022
Note: The following countries are included in the averages: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, and Uruguay. Countries have been included in the average that is presented in a particular panel according to their excise tax structure in place. Hence, countries are included in a different panel if they have changed their tobacco excise tax structure at a particular year during the 2008 – 2022 period. Tax policy indicators have been computed using national currency and have been adjusted for inflation; therefore, the data presents inflation-adjusted trends. Tobacco prices indicators are based on data for the most sold brand of cigarettes. “Pre-tax price” corresponds to the retail price of the most sold brand of cigarettes net of the indirect taxes levied on this brand (tobacco excise taxes, VAT, import duties and other indirect taxes). The “relative tax wedge” is defined as the difference between the change in the pre-tax price and the retail price.
Source: WHO report on the global tobacco epidemic (WHO, 2023[3]); World Bank World Development Indicators (World Bank, 2024[7]); IMF International Financial Statistics (IMF, 2024[8]).
Despite progress being made over the last decades, LAC countries need to continue to introduce tobacco tax reform measures. As described in this section, there are four main reasons for tobacco tax reform (Sandoval et al., 2022[9]):
1. Smoking prevalence can be reduced further.
2. Tobacco use leads to high economic and social costs.
3. Cigarettes remain affordable.
4. Countries are not fully tapping into their tobacco tax revenue potential.
Tobacco use prevalence remains high in some countries and amongst young people. Overall, tobacco prevalence remains high, and even in countries where prevalence is lower, there remains scope to reduce it further (Blanco Marquizo et al., 2022[10]; Hutchinson et al., 2022[11]) (see also Figure 1.6 in Chapter 1). In several countries, tobacco consumption has increased since the COVID-19 pandemic (see Chapter 1). Finally, the increasing use of new tobacco and nicotine products introduces new consumers to the tobacco market (Perucic et al., 2022[12]).
The economic and social costs of tobacco use are high. The economic and social costs include the direct health costs, the loss in economic productivity and the caregiver’s related costs (Goodchild, Nargis and Tursan d’Espaignet, 2017[13]; Pichon-Riviere et al., 2023[14]). These costs are high and outweigh largely the revenues raised from tobacco excise taxes (see Table 1.2 in Chapter 1). While difficult to quantify, the loss in well-being for people who suffer from a smoking-caused disease and their families, caused by active and/or passive smoking, provides an additional strong rationale for tobacco tax reform.
Cigarettes remain affordable. The affordability of tobacco products depends on the tobacco tax share, tobacco prices, the level of income within the country, and the evolution of the income level with inflation and real income growth compared to the evolution of prices and tobacco taxes (Blecher, 2020[15]). Since 2012, cigarettes have not become less affordable in 23 out of 33 countries (Table 1.4 in Chapter 1) and the affordability of the most sold brand of cigarettes in LAC has remained fairly stable (Figure 5.5). More recently, from 2020 to 2022, the average cigarette prices have decreased across regions, including in LAC where the prices of cigarettes have not even been keeping up with inflation or income growth in most countries (Drope et al., 2024[16]).
Countries could raise more revenue from tobacco taxes (Goodchild, Sandoval and Belausteguigoitia, 2017[17]). Tobacco tax revenue varies across countries in LAC. Revenue from all indirect taxes levied on tobacco range from 0.01% of total tax revenue and GDP in Barbados to 2.58% of total tax revenue in Chile (0.67% of GDP) (Figure 2.4 in Chapter 2). Tobacco excise taxes raise, on average, 0.12% of GDP (0.50% of total tax revenue) in LAC (Figure 2.5 in Chapter 2). This is reflected in the substantial variation across LAC countries in the average excise tax revenue collected per pack of legal cigarettes sold, ranging from USD PPP 0.5 in Bolivia to USD PPP 4.5 in Chile (Figure 2.12 in Chapter 2). The extent to which a country can raise more revenue from tobacco taxes will depend on a number of factors, including the current tobacco tax design, tobacco use prevalence, the pre-tax prices for tobacco and the price elasticity of demand (South American Network on Applied Economics/Red Sur, 2019[18]; Blecher, Ozer and Bloom, 2023[19]; Petit and Nagy, 2016[20]).
As a percentage of GDP per capita required to purchase 100 packs of 20 cigarettes
Note: The figure includes the following countries: Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, Venezuela. The affordability indicator measures the percentage of the country’s GDP per capita required to purchase 100 packs of 20 cigarettes. A higher (lower) percentage means lower (higher) affordability of cigarettes. To ensure comparability of average affordability across LAC countries over time, countries for which there was no information for one or multiple years have been excluded.
Source: WHO report on the global tobacco epidemic (WHO, 2023[3]).
Increases in tobacco tax rates have positive impacts on tax revenue in the short run. Between 2008 and 2016, the average excise tax revenue collected per pack of legal cigarettes sold increased from USD PPP 1.2 to USD PPP 2.0 (Figure 5.6), in line with increases in the tobacco tax rates, which have been more significant before 2016 (see Box 5.1). Since 2017, the average revenue ratio per pack of cigarettes has increased only slightly (from USD PPP 2.1 to 2.4 in 2022) which is consistent with the relative lack of tobacco tax increases in recent years (Figure 5.1 and Figure 5.2). This illustrates the fact that, because of inelastic tobacco demand, tobacco tax increases have a positive impact on tax revenue on average (Jawad et al., 2018[21]; Guindon, Paraje and Chaloupka, 2018[22]).
In the long run also, increases in tobacco tax rates have a positive net fiscal impact. Tobacco tax rates increases aim to reduce tobacco consumption which in turn may reduce tobacco tax revenue. However, the reduction in tax revenue tends to be smaller than the additional revenue generated by the tax increase. In addition, a reduction in tobacco consumption decreases the social and economic costs of smoking. Given that the costs of tobacco use outweigh the tobacco tax revenue across countries in LAC, the net effect of a free-smoking society would always remain positive (Fuchs et al., 2019[23]).
Tobacco excise tax revenue in USD PPP collected per pack of legal cigarettes sold
Note: See Box 2.1 (Chapter 2) for more information on tobacco tax revenue (source of information and calculations). The following countries are included: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru and Uruguay. The country selection is provided by the availability of data on sales of cigarettes in Euromonitor International Tobacco Industry edition, 2023 © All rights reserved (Euromonitor International, 2023[24]).
Source: OECD Revenue Statistics (OECD, 2024[25]); National data; IMF World Economic Outlook Database (IMF, 2023[4]); and OECD own calculations based on Euromonitor International’s Tobacco Industry edition (Euromonitor International, 2023[24]).
Scope exists to further align the design of the tobacco tax policies in LAC countries with WHO tobacco tax best practices. Despite reform progress over the last decades (Figure 5.2), there remains significant scope to further strengthen the design of tobacco taxes, increase the tobacco tax rates and tax share and improve the tobacco tax administration (Chaloupka et al., 2021[26]). The increase of specific tobacco excise tax amounts and its indexation to inflation and real income growth, and the introduction of minimum tax or price floor in countries with a large ad valorem tobacco tax component are priority reform measures (see Figure 4.3 in Chapter 4), which will have significant and immediate reform impacts.
In order to strengthen the effectiveness of tobacco taxes in reducing smoking prevalence, LAC countries will have to introduce a set of complementary tobacco tax policy and administration measures. The tobacco excise tax administration and enforcement have an impact on the effectiveness of tobacco excise taxes. This chapter therefore introduces a number of additional best practices that are currently not sufficiently addressed by LAC countries. Box 5.2 lists those additional tobacco tax best practices, while the rest of the chapter will discuss them one by one.
Accounting for the strategic response of tobacco businesses when designing tobacco tax policy
BP13: Evaluate the impact of tobacco tax increases on pre-tax and retail prices over time and follow-up with additional tax measures as necessary.
Aligning tobacco tax administration and tax policy design
BP14: Select the tobacco excise tax point that facilitates the tobacco excise tax administration.
BP15: Given the choice of the excise taxing point, introduce measures to limit fraud and illicit trade:
Use modern fiscal markings.
Collect more detailed tobacco transaction information within the excise tax declarations.
Enforce mandatory licencing for all parts of the tobacco value chain.
BP16: Align the tobacco excise tax structure with the excise taxing point.
BP17: In countries with an ad valorem tobacco tax component, introduce a minimum tax or price floor; levy the ad valorem tax on the suggested or actual retail price rather than on the ex-factory price. Use information from the VAT administration to ensure that the tobacco tax base is aligned with the retail price.
BP18: Levy the VAT on the tobacco excise tax-inclusive price.
Strengthening tobacco excise and income tax policy coherence
BP19: Implement Article 5.3 of the WHO FCTC so that direct and indirect (tax and non-tax) subsidies are not provided to tobacco companies to prevent these subsidies from undermining the effectiveness of tobacco tax policies.
Strengthening domestic and regional tobacco tax cooperation
BP20: Reinforce the cooperation between Ministries of Finance and Ministries of Health to ensure that tobacco tax policies are effective in significantly reducing tobacco use prevalence. Include other parts of government to participate in such a dialogue, such as the tax administration and the customs authorities.
BP21: Engage in regional coordination and cooperation on tobacco tax policy and exchange information on tobacco-related information to avoid that weak tobacco control policies in one country create a hurdle for effective tobacco tax policies in other countries.
Source: OECD.
5.3.1. Accounting for strategic response of tobacco businesses when designing tobacco tax policy
Tobacco companies respond strategically to tobacco tax increases to maximise their profits. As any other businesses, tobacco companies aim at maximising their profits. A tobacco tax reform, by aiming at reducing demand for tobacco products, will put the profits of tobacco companies under pressure. In response, tobacco companies adjust their behaviour to minimise the impact, and therefore the effectiveness, of the tobacco tax reform (Partos et al., 2020[5]; Sheikh, Branston and Gilmore, 2021[6]).
Tobacco companies respond in varies ways to tobacco tax reform, including by:
1. Limiting the pass-through of a tobacco tax increase by lowering the pre-tax price, in particular in the short run. By absorbing partly (or fully) the tax increase, tobacco companies will limit (or avoid) the price increase to minimise the number of smokers that reduce or quit smoking. The extent to which tobacco businesses will absorb a tobacco tax increase will depend on many factors, including the profitability of the business (the more profitable is a tobacco company, the more it can engage in strategies that absorb, even if it is only temporarily, a tax increase), the degree of competition in the tobacco market, and the level of the tax increase (a more ambitious tax increase will be more difficult to fully absorb as it will be more costly for tobacco companies).
2. Gradually increasing pre-tax retail prices in response to a tobacco tax increase, so that the year-to-year change in the tobacco price is such that consumers do not change their smoking behaviour. When tobacco companies are successful in limiting the behavioural response of smokers, they may even decide to continue to increase the price of tobacco products even if the tobacco tax has been fully passed through into retail prices.
3. Adjusting the pre-tax price of brands differently aligned with the price elasticity of demand that may vary across brands. For instance, if demand for premium brands is less price elastic than the demand for cheaper brands, tobacco companies may decide to under-pass through the tax increase for cheaper products and, in order to offset the loss in profits, to over-pass through the tax increase in the price of premium brands.
4. Creating cheaper new brands that allow smokers to trade down (i.e. to smoke cheaper tobacco products) rather than reduce or quit smoking. If new brands are registered outside the country where the products are smoked, the tobacco business may shift part of its profits to that jurisdiction. Tax avoidance strategies increase after-income tax profitability (Vermeulen, Dillen and Branston, 2020[27]), which may further increase the financial resources that can be used to undermine the effectiveness of tobacco tax increases.
To tackle tobacco companies’ strategic responses, countries have to implement dynamic tobacco tax reform and to evaluate the impact of a tax increase on tobacco product retail prices. If necessary, countries can introduce additional tobacco tax measures, including tax rate increases to have a greater impact on reducing consumption (Tauras et al., 2014[28]). Hence an additional best practice is to Evaluate the impact of tobacco tax increases on pre-tax and retail prices over time and follow-up with additional tax measures as necessary (BP 13 see Box 5.2).
From the country-specific information included in this report, LAC countries are, at best, only modestly aligned with BP13. On average, countries that have introduced a tobacco tax reform in the last decade have not introduced additional measures based on an evaluation of the impact of the tax increase on tobacco retail prices in the following years. As tobacco tax reform success of the past does not necessarily extend over time, the lack of (or insufficient) follow-up reform measures may undermine the effectiveness of tobacco tax reform.
5.3.2. Aligning tobacco tax administration and tax policy design
The tobacco excise tax administration and enforcement have an impact on the effectiveness of tobacco excise taxes. This section introduces important tax administration issues, including the choice of the excise taxing point and the order in which tobacco taxes are levied, and identifies how they are implemented in countries in LAC.
The excise taxing point
Governments need to select the excise taxing point. The excise taxing point is “the point at which the legislation provides for the liability over the excisable goods or services to be recognized and brought to account for the purposes of payment of the appropriate duty” (Preece, 2008[29]).
Tobacco excise taxes can be levied at different taxing points (Figure 5.7):
At the input stage (i.e. inputs used in the production of tobacco products).
At the manufacture point (i.e. on the producer or importer of tobacco products, which are supposed to pass through the tax in the final retail price that the smoker pays).
At the domestic distribution (i.e. wholesale) stage.
At the retail point (i.e. at the point of sale to the smoker).
The “optimal” (i.e. most effective) excise taxing point will be the point in the value chain where:
Tobacco excise taxes have the greatest probability that they will be passed through into retail prices and reduce the affordability of tobacco products (to meet health and revenue objectives).
The tax administration can keep track of volume and the value of tobacco transactions and has to engage with a relatively limited number of agents (to ease the enforcement of the tax).
Taxpayers have the resources and knowledge to comply with tobacco excise tax regulations (to ease voluntary compliance).
With respect to the import and export of tobacco products:
Excises on importation are meant to align the tax treatment of imported tobacco products with the tax treatment of domestically produced tobacco products.
Tobacco excises are remitted when tobacco products are exported (in case they have been taxed as they may also have remained under the suspension regime applied within the tax warehouse – see below). The Contracting Parties to the General Agreement on Tariffs and Trade may, but are not required, exempt or remit taxes on exported tobacco products. In practice, LAC countries do exempt exported tobacco products from domestic tobacco excise taxes, but do not facilitate the compliance with the tobacco tax rules in the country that imports the products (see below).
Source: OECD based on (Hiscock and Bloomfield, 2021[30]).
All countries in LAC levy tobacco excise taxes at the manufacturing point and at the border when tobacco products are imported (see Chapter 3). This approach implies that the excise tax administration has to interact with a relatively limited number of tobacco producers and importers. These companies need to be registered and provide information to the tax administration, which facilitates the control of the value chain by the tax administration. However, this taxing point may create challenges in terms of the choice of the tax base (see below). Moreover, if tobacco manufacturers control (or own) the distribution of tobacco products, they may be able to transfer part of their margin to their distributors to reduce the tobacco excise taxable base. Given limited tax administrative resources in LAC countries, the advantages of having to interact with a small number of taxpayers outweighs the challenges that are related to the choice of the manufacturing/importing level as the taxing point, in particular if additional measures are implemented that protect the tax base.
This discussion leads to an additional tobacco tax policy best practice for which LAC countries perform strongly (BP 14 see Box 5.2): Select the tobacco excise tax point that facilitates the administration tobacco excise taxes.
The use of fiscal marking
Tax administrations need to define a series of rules with respect to:
Actions that lead to a taxable event (e.g. the production or importation of cigarettes).
The agent who is liable to pay the tax.
The point in time the tobacco excise tax becomes chargeable (i.e. when the tobacco tax can be claimed from the agent who is liable to pay the tax).
Similarly, customs legislation will have to define a wide set of rules that determine how tobacco products can move within the territory and the rules that need to be followed when they are exported.
Countries also need to establish rules regarding tax warehouses. Production, processing and holding of tobacco products can only take place in a tax warehouse. Tax warehouses should receive authorisation of competent authorities to operate the warehouse, provide all the required documentation and follow the procedures as defined by the tobacco excise tax administration. Under “suspension arrangements”, produced or imported tobacco products may be held in a tax warehouse without tobacco excise tax becoming chargeable. Tobacco excise taxes are chargeable when they are released for consumption or when shortages (that have to be defined by the law) are recorded by the tax administration. The tax administration also has to define clear rules of what is understood under “shortages”. Lost tobacco products that are attributable to force majeure (e.g., a warehouse fire) should not trigger taxation. Theft, on the other hand, is often considered a taxable event in order to avoid that the tax warehouse does not comply strictly with the regulations in place.
To keep track of tobacco products that have paid tax when released from the tax warehouse, countries can apply fiscal markings. Fiscal markings are traditional or modern tax stamps which are labels or marks placed on goods to show that the applicable excise tax has been paid (WHO, 2021[2]). Traditional tax stamps provide information on the country of origin and whether the excise tax has been paid. Modern tax stamps (i.e. a unique identifier) provide information that signals that producers and importers of tobacco products comply with tax payment requirements, help detect illicit tobacco products, and provide detailed information on the product and production process.
This discussion leads to an additional tobacco taxation best practice (BP 15 see Box 5.2): Given the choice of the excise taxing point, introduce measures to limit fraud and illicit trade:
Use modern fiscal markings
Collect more detailed tobacco transaction information within the excise tax declarations
Enforce mandatory licencing for all parts of the tobacco value chain.
LAC countries underperform with respect to BP15. Although information on how countries organise their tobacco excise tax administration is limited, there seems to be scope to strengthen the regulations to facilitate the administration of tobacco excise taxes and to prevent fraud and illicit trade, including through the use of fiscal markings and tax stamps. Information shows that only 8 out of 19 countries apply fiscal markings for cigarettes (often traditional tax stamps) and only 4 for other tobacco products (Figure 5.8). Other measures could be better implemented, such as more detailed excise tax declarations and mandatory licencing for all parts of the tobacco value chain (see Table 3.10 and Table 3.11 in Chapter 3).
Number of LAC countries, 2022
Note: The following countries are included: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. The category “other tobacco products” refers to cigars, cigarillos and Roll-Your-Own (RYO) tobacco products.
Source: WHO report on the global tobacco epidemic (WHO, 2023[3]).
Choice of the tax base
From a tax administrative perspective, the choice of the excise taxing point at the manufacturing and import level strengthens the preference for specific excise taxes over ad valorem taxes. Specific excise taxes can easily be implemented at the producer or importer stage as no price information is required. Ad valorem taxes, on the other hand, should be levied on the retail price, but this information is not immediately available at the producer or importer level. The use of ad valorem taxes therefore creates additional complexity from a tax administrative perspective (Petit and Nagy, 2016[20]). This leads to an additional best practice (BP 16 see Box 5.2): Align the tobacco excise tax structure with the excise taxing point. Given the significant use of ad valorem excise taxes, LAC countries perform moderately on BP16.
The information available to the tobacco excise tax administration may have an impact on the ad valorem tax base. LAC countries differ in their choice of the ad valorem tax base. For cigarettes, the excise tax base is the producer (ex-factory) price in four countries, the suggested retail price in five countries, and the retail price in three countries (Figure 5.9). Information about producer (ex-factory) prices is readily available at the manufacturer level, but the price will be lower than the final retail price (and even more so if tobacco operators further down the supply chain are affiliated to the manufacturer), which will result in a lower tax share if the tax rates are not adjusted upward accordingly. Information about the final (observed) retail price might not be available at the excise taxing point. Some countries therefore apply the retail price that is suggested by the producers or importers as the ad valorem tax base. This tax base is easier to enforce but implies that the tax administration has to verify whether the “suggested” price is sufficiently similar (within error margin) to the final (observed) retail price in order to avoid that tobacco businesses “suggest” a price that is too low. The excise tax administration may rely on information from the VAT administration in case VAT is levied on the retail price to enforce a suggested retail price that is close to (or equal to) the (actual) retail price that consumers pay. Finally, in order to avoid that ad valorem taxes result in low tax burdens for cheaper tobacco products, countries that levy an ad valorem tax only will have to complement the tax with a price floor or minimum tax to ensure that a minimum amount of tax is paid. This price floor would be triggered when the ad valorem tax base would be below the floor.
Number of countries, 2022
Note: The following countries are included: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. Following the WHO report on the global tobacco epidemic (WHO, 2021[31]), new tobacco and nicotine products in this report include ENDS, ENNDS and HTPs. Argentina, Brazil, Mexico, Nicaragua, Panama, Uruguay, and Venezuela do not levy an excise tax on ENDS or ENNDS because their sales are banned. In Brazil, Mexico and Panama, the sales of HTPs are also banned (WHO, 2023[3]). “Other” refers to the tax base for RYO tobacco products in Colombia which is 10% of the specific excise tax.
Source: National legislation listed in Annex Table 3.B.1 in Chapter 3.
This leads to an additional tobacco taxation best practice (BP 17 see Box 5.2): In countries with an ad valorem tobacco tax component, introduce a minimum tax or price floor; levy the tax on the suggested or actual retail price rather than on the ex-factory price. Use information from the VAT administration to ensure that the tobacco tax base is aligned with the retail price. The narrower is the tax base, the higher should be the ad valorem rate (for a given tax share).
LAC countries seem to follow BP17 relatively well. Although limited information is available, countries seem to have aligned the choice of the ad valorem tax base with their existing administrative capacities and access to information. In general, countries that apply the ad valorem rate for cigarettes on the producer price tend to levy higher rates than countries that levy the tax on the retail price (Figure 5.10). For instance, the Dominican Republic and El Salvador (mixed excise tax structure) have lower rates than Argentina, Panama and Venezuela (ad valorem tax only) (Figure 5.10). Before its dual VAT reform, Brazil levied a relatively high statutory tax rate (66.7%) on a narrow tax base (15% of the tax-inclusive retail price).
As a percentage of the tax base and as a percentage of the retail price, 2022
Note: Countries with an asterisk (*) implement an ad valorem only excise tax structure, while the other countries have a mixed excise tax structure. The ad valorem tax base is tax exclusive in Argentina, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Mexico, Panama; and tax inclusive in Brazil, Chile, Colombia and Venezuela. In Brazil, the ad valorem excise tax base is narrowed as it is 15% of the tax-inclusive retail price. Retail prices for a 20-unit pack of cigarettes of the most sold brand.
Source: National legislation listed in Annex Table 3.B.1 in Chapter 3.
Tobacco excise taxes and the VAT are administered separately in countries in LAC. The fact that excises have a different taxing point than the VAT implies that countries need a separate VAT and excise tax administration that have their own rules and procedures. This is the case in LAC countries. However, the fact that both taxes are administered separately will require that protocols are set in place to ensure that both administrations cooperate and exchange information to avoid fraud.
The sequence in which tobacco taxes are levied
The sequence of the tobacco taxes that are levied has an impact on the tobacco tax share, except if the tax level is adjusted accordingly. The sequence of the tobacco taxes (i.e. whether taxes are levied on tax-exclusive or tax-inclusive prices) has an impact on whether the tax base is broad or narrow, which finally has an impact on the total tobacco tax share. However, this effect can be mitigated by adjusting the level of the taxes that are levied. Insofar tobacco excise taxes internalise negative external effects and make smokers pay for the social costs of smoking and because the VAT is a general tax on consumption, one could argue that tobacco excise taxes should be levied first, and the VAT should be levied on the tobacco excise tax-inclusive price. This leads to an additional tobacco taxation best practice (BP18, see Box 5.2): Levy the VAT on the tobacco excise tax-inclusive price.
LAC countries differ in the tobacco tax sequence that they apply, although most countries levy the VAT on top of the excise tax-inclusive retail price (Table 5.1). The sequence in which tobacco taxes are levied can vary. For instance, ad valorem tobacco excise taxes can be levied on the price that includes or excludes the specific tobacco tax. Ad valorem tobacco taxes can be levied before the VAT is applied, or after. Table 5.1 provides available information on the taxing order that is applied in countries in LAC. Most LAC countries levy the VAT on top of the tobacco excise tax inclusive price (Table 5.1). In Costa Rica, the Dominican Republic, El Salvador and Mexico, the ad valorem component applies first (i.e. the ad valorem tobacco tax is levied on a narrow specific tax and VAT-exclusive retail price), the specific tobacco excise tax is applied next (i.e. the tax is added to the price that includes the ad valorem tax), and the VAT is levied on top (i.e. the VAT is levied on the tobacco excise tax-inclusive price). In contrast, in Brazil and Colombia, the specific component applies first, and the ad valorem tax is levied on the price that includes the specific tax. However, these countries levy VAT on a tobacco excise tax-exclusive retail price.
Source: National legislation listed in Annex Table 3.B.5 from Annex 3.B (Chapter 3).
5.3.3. Strengthening tobacco excise and income tax policy coherence
The WHO Framework Convention on Tobacco Control (WHO FCTC) is designed to protect present and future generations from the health, social, environmental and economic consequences and harm cause by tobacco consumption and exposure to tobacco smoke. Article 5.3 of the WHO FCTC states: “In setting and implementing their public health policies with respect to tobacco control, Parties shall act to protect these policies from commercial and other vested interests of the tobacco industry in accordance with national law”. Article 5.3 Guidelines recommend that WHO FCTC Parties do not provide subsidies to tobacco companies.
The use of (direct and indirect) tax incentives targeted at tobacco companies, or that they benefit from, is not aligned with the WHO FCTC as they provide a subsidy. The WHO FCTC implies that direct and indirect subsidies, including subsidies provided through the tax system, are not aligned with Article 5.3 of the WHO FCTC. The Guidelines to the implementation of Article 5.3 of the FCTC explicitly state: “Do not give preferential treatment to the tobacco industry”. Tax expenditures and tax incentives can be considered as subsidies provided through the tax system. They can come in different forms, including tax allowances (provisions that narrow the tax base), tax credits (provisions that reduce the tax liability), tax exemptions or exclusions, and reduced tax rates (Campos Vázquez, 2022[32]). They can range from profit-based tax incentives that reduce or exempt a certain amount of profits (e.g. free trade zones, tax holidays) to cost-based tax incentives that reduce the cost of investment or stimulate innovation (e.g. tax credits, accelerated tax depreciation allowances).
Weak tobacco control policies in one country create negative spillovers/external effects for other countries in the LAC region. Policies in individual countries that support and subsidise the cultivation of tobacco, the production and/or the distribution of tobacco products, including through the use of tax incentives, will have a negative impact on other countries, as these subsidies will allow tobacco business to sell tobacco products at a cheaper price.
Countries in LAC need to ensure that their income tax system does not undermine the effectiveness of tobacco excise tax and other tobacco control policies that are in place. The case for tobacco companies to operate in free trade zones, which is the case in a number of LAC countries, where businesses are exempted from income tax and where they do not have to comply with information provisions and regulations that apply to other businesses, is particularly weak (WHO, 2021[33]). This leads to the additional BP19: Implement Article 5.3 of the WHO FCTC so that direct and indirect (tax and non-tax) subsidies are not provided to tobacco companies to prevent these subsidies from undermining the effectiveness of tobacco tax policies.
Across countries in the world, the direct tax implications of Article 5.3 of the WHO FCTC have not resulted in income tax reform. This is also the case in countries in LAC.
5.3.4. Strengthening domestic and regional tobacco tax cooperation
Domestic tobacco tax cooperation
As shown by the MPOWER policy package, efficient tobacco control policies require coherent measures to be implemented by different stakeholders, in particular Health and Finance Ministries. Traditionally, the main objective of the Ministry of Health is to reduce tobacco use prevalence, while the Ministry of Finance aims at raising tobacco tax revenue and reducing the net fiscal impact of tobacco use. Achieving both objectives requires that both Ministries are actively engaged in a dialogue and collaborate (BP 20 see Box 5.2). However, the priority for tobacco tax reform is the reduction in the tobacco use prevalence as this will allow both ministries to meet their objectives. First, because decreasing tobacco consumption will reduce health expenditure. Second, because tobacco tax policy will not decrease tobacco tax revenues in the short run due to the inelastic demand for tobacco products. In the long run, a successful tobacco tax reform that would significantly reduce smoking would indeed result in a drop in tobacco tax revenues. However, the drop in the health, economic and social costs of smoking would outweigh the drop in tobacco tax revenue: the net effect on the budget will therefore always be positive (Marquez and Moreno-Dodson, 2017[34]).
In practice, there are many countries in LAC where the Ministries of Health and Finance have to establish, or reinforce, their dialogue and collaboration. The collaboration can focus on the two objectives cited above (decreasing tobacco use prevalence; raising tobacco tax revenue and reducing the net fiscal impact of tobacco use) and be expanded to other tobacco-related topics such as the cost of smoking, the economic footprint of the tobacco sector (in terms of employment in particular), the effectiveness of tobacco control policies in place, the industry response to tobacco control policies, illicit trade in tobacco products, etc. (Lwin et al., 2023[35]). Across-government collaboration and coordination should involve other government departments, including the tax administration and the customs authorities.
There possibly is a role for other Ministries, such as the Ministry of Industry, Trade, Agriculture or Labour, to maximise the effectiveness of tobacco tax policy. For instance, subsidies to the raw tobacco sector will undermine the effectiveness of tobacco control policies; rather than subsidizing the tobacco agricultural sector, it would be more effective to stimulate farmers to diversify their activities into other crops. An integrated policy approach would allow countries to develop cross cutting policies (Sandoval et al., 2022[9]), such as providing training to former tobacco workers financed through the revenues raised from tobacco excise taxes.
This leads to an additional best practice (BP 20 see Box 5.2): Reinforce the cooperation between Ministries of Finance and Ministries of Health to ensure that tobacco tax policies are effective in significantly reducing tobacco use prevalence. Include other part of government to participate in such a dialogue, such as the tax administration and the customs authorities.
Regional tobacco tax coordination and cooperation
The design and administration of a country’s tobacco tax policy can generate negative cross-country spill-over effects. For instance, weak tobacco tax enforcement and administration in one country can increase illicit trade opportunities that will negatively affect other countries. Countries that allow tobacco companies to operate in tax-free economic zones will provide a windfall gain to these companies. These profits may then be used strategically to limit the behavioural response of smokers as a result of a tax increase in other countries.
The LAC region lacks regional coordination and cooperation on tobacco tax policy and administration. For example, tobacco tax rates are set in isolation from neighbouring countries. Not all countries tax all traditional tobacco products (cigars, cigarillos, and RYO tobacco) and new tobacco and nicotine products. There is no analysis of the volumes and characteristics of manufactured tobacco products in tax-free economic zones nor whether the products will be sold in the domestic or a foreign market. When countries have an effective domestic track and trace system (which is rather the exception than the rule in LAC) information on tobacco production and (illicit) trade tends not to be shared across countries, which does not facilitate the fight against illicit trade at the regional level (Joossens and Raw, 2012[36]; OECD, 2018[37]; WHO, 2018[38]). Regional coordination and cooperation of tobacco tax policies is therefore one of the key reform priorities for the LAC region (Sandoval et al., 2022[9]).
There is scope to strengthen the coordination and cooperation across LAC countries using the mechanisms that are already in place. First, only seven countries in LAC have ratified the WHO Protocol to Eliminate Illicit Trade in Tobacco Products, adopted in 2012, that aims to eliminate all forms of illicit trade in tobacco products (WHO, 2013[39]). Second, LAC countries have experience in exchanging financial account information for tax purposes, both upon request and automatically, which allows countries to tax capital income more effectively (OECD, 2022[40]). The effective cooperation on income taxes should inspire countries to start exchanging tobacco tax and non-tax information, such as volumes of domestic tobacco production (tobacco leaves, manufactured products), exported tobacco products and destination of tobacco exports. Finally, the Regional Tax Cooperation Platform for LAC created in 2023 is an excellent opportunity to discuss tobacco taxation, both from the policy and administration side, and to strengthen tobacco collaboration at the regional level (ECLAC, 2024[41]).
This leads to an additional best practice (BP 21 see Box 5.2): Engage in regional coordination and cooperation on tobacco tax policy and exchange information on tobacco-related information to avoid that weak tobacco control policies in one country create a hurdle for effective tobacco tax policies in other countries. In particular, make a greater use of existing mechanisms, such as the WHO Protocol to Eliminate Illicit Trade in Tobacco Products and the Regional Tax Cooperation Platform for LAC, and build on the experience that countries have in sharing tax information.
References
[10] Blanco Marquizo, A. et al. (2022), “Moving forward in the Americas: tobacco control fosters sustainable development”, Revista Panamericana de Salud Pública, Vol. 46, p. 1, https://doi.org/10.26633/rpsp.2022.139.
[15] Blecher, E. (2020), “Affordability of Tobacco Products: The Case of Cigarettes”, Tobacconomics, https://tobacconomics.org/research/affordability-of-tobacco-products-the-case-of-cigarettes/.
[19] Blecher, E., C. Ozer and D. Bloom (2023), Knowledge Note: Unpacking the empirics behind health tax revenue, World Bank, https://thedocs.worldbank.org/en/doc/f1f068e38935e2f5d92b7edf365d5089-0350032023/original/KN-4-Unpacking-the-empirics-behind-health-tax-revenues.pdf.
[32] Campos Vázquez, R. (2022), Measurement of tax expenditures in Latin America, Economic Commission for Latin America and the Caribbean, https://www.cepal.org/en/publications/48526-measurement-tax-expenditures-latin-america.
[26] Chaloupka, F. et al. (2021), Cigarette Tax Scorecard (2nd Edition), Tobacconomics, https://tobacconomics.org/research/cigarette-tax-scorecard-2nd-edition/.
[16] Drope, J. et al. (2024), Tobacconomics cigarette tax scorecard (3rd ed.), Bloomberg School of Public Health, Johns Hopkins University, https://tobacconomics.org/research/cigarette-tax-scorecard-3rd-edition/.
[41] ECLAC (2024), The Regional Tax Cooperation Platform for Latin America and the Caribbean is ready, Economic Commission for Latin America and the Caribbean, https://www.cepal.org/en/notes/regional-tax-cooperation-platform-latin-america-and-caribbean-ready.
[24] Euromonitor International (2023), Euromonitor International’s Tobacco Industry edition, https://www.euromonitor.com/tobacco (accessed on 1 August 2023).
[23] Fuchs, A. et al. (2019), Is Tobacco Taxation Regressive? Evidence on Public Health, Domestic Resource Mobilization, and Equity Improvements, World Bank Group, https://doi.org/10.1596/31575.
[13] Goodchild, M., N. Nargis and E. Tursan d’Espaignet (2017), “Global economic cost of smoking-attributable diseases”, Tobacco Control, Vol. 27/1, pp. 58-64, https://doi.org/10.1136/tobaccocontrol-2016-053305.
[17] Goodchild, M., R. Sandoval and I. Belausteguigoitia (2017), “Generating revenue by raising tobacco taxes in Latin America and the Caribbean”, Revista Panamericana de Salud Pública, pp. 1-7, https://doi.org/10.26633/rpsp.2017.151.
[22] Guindon, G., G. Paraje and F. Chaloupka (2018), “The Impact of Prices and Taxes on the Use of Tobacco Products in Latin America and the Caribbean”, American Journal of Public Health, Vol. 108/S6, pp. S492-S502, https://doi.org/10.2105/ajph.2014.302396r.
[30] Hiscock, R. and M. Bloomfield (2021), “The value of studying supply chains for tobacco control”, Tobacco Prevention & Cessation, Vol. 7/February, pp. 1-7, https://doi.org/10.18332/tpc/131811.
[11] Hutchinson, B. et al. (2022), “The case for investment in tobacco control: lessons from four countries in the Americas”, Revista Panamericana de Salud Pública, Vol. 46, p. 1, https://doi.org/10.26633/rpsp.2022.174.
[8] IMF (2024), International Financial Statistics (IFS), International Monetary Fund, https://data.imf.org/?sk=4c514d48-b6ba-49ed-8ab9-52b0c1a0179b&sId=1390030341854 (accessed on 13 January 2024).
[4] IMF (2023), World Economic Outlook Database, International Monetary Fund, https://www.imf.org/en/Publications/WEO/weo-database/2023/October (accessed on 13 January 2024).
[21] Jawad, M. et al. (2018), “Price elasticity of demand of non-cigarette tobacco products: a systematic review and meta-analysis”, Tobacco Control, Vol. 27/6, pp. 689-695, https://doi.org/10.1136/tobaccocontrol-2017-054056.
[36] Joossens, L. and M. Raw (2012), “From cigarette smuggling to illicit tobacco trade: Table 1”, Tobacco Control, Vol. 21/2, pp. 230-234, https://doi.org/10.1136/tobaccocontrol-2011-050205.
[35] Lwin, K. et al. (2023), “Framing health taxes: learning from low- and middle-income countries”, BMJ Global Health, Vol. 8/Suppl 8, p. e012955, https://doi.org/10.1136/bmjgh-2023-012955.
[34] Marquez, P. and B. Moreno-Dodson (2017), Tobacco Tax Reform at the Crossroads of Health and Development: A Multisectoral Perspective, World Bank, https://openknowledge.worldbank.org/entities/publication/3d81d739-30aa-5092-9c5b-e0b4b68d40e1.
[25] OECD (2024), Global Revenue Statistics Database, Organisation for Economic Co-operation and Development, https://www.oecd.org/tax/tax-policy/global-revenue-statistics-database.htm (accessed on 13 August 2023).
[40] OECD (2022), Peer Review of the Automatic Exchange of Financial Account Information 2022, OECD Publishing, Paris, https://doi.org/10.1787/36e7cded-en.
[37] OECD (2018), Governance Frameworks to Counter Illicit Trade, Illicit Trade, OECD Publishing, Paris, https://doi.org/10.1787/9789264291652-en.
[5] Partos, T. et al. (2020), “Impact of tobacco tax increases and industry pricing on smoking behaviours and inequalities: a mixed-methods study”, Public Health Research, Vol. 8/6, https://doi.org/10.3310/phr08060.
[12] Perucic, A. et al. (2022), “Taxation of novel and emerging nicotine and tobacco products (HTPs, ENDS, and ENNDS) globally and in Latin America”, Revista Panamericana de Salud Publica/Pan American Journal of Public Health, Vol. 46, https://doi.org/10.26633/RPSP.2022.175.
[20] Petit, P. and J. Nagy (2016), “How to Design and Enforce Tobacco Excises?” How-To Note No. 2016/003, https://doi.org/10.5089/9781475546651.061.
[14] Pichon-Riviere, A. et al. (2023), “Health, economic and social burden of tobacco in Latin America and the expected gains of fully implementing taxes, plain packaging, advertising bans and smoke-free environments control measures: a modelling study”, Tobacco Control, pp. tc-2022-057618, https://doi.org/10.1136/tc-2022-057618.
[29] Preece, R. (2008), “Key controls in the administration of excise duties”, World Customs Journal, Vol. 2/1, https://worldcustomsjournal.org/Archives/Volume%202%2C%20Number%201%20(Apr%202008)/08%20key_controls_in_the_administration_of_excise_duties.pdf.
[1] Sandoval, R. et al. (2022), “Advances in Tobacco Control in the Region of the Americas, 2020”, Revista Panamericana de Salud Pública, Vol. 46, p. 1, https://doi.org/10.26633/rpsp.2022.202.
[9] Sandoval, R. et al. (2022), “Lessons learned from fostering tobacco taxes in the Americas and implications for other health taxes”, Revista Panamericana de Salud Pública, Vol. 46, p. 1, https://doi.org/10.26633/rpsp.2022.188.
[6] Sheikh, Z., J. Branston and A. Gilmore (2021), “Tobacco industry pricing strategies in response to excise tax policies: a systematic review”, Tobacco Control, Vol. 32/2, pp. 239-250, https://doi.org/10.1136/tobaccocontrol-2021-056630.
[18] South American Network on Applied Economics/Red Sur (2019), Effective Tobacco Taxes in Latin America: Obstacles and Recommendations Based on National Experiences, Tobacconomics, https://www.tobacconomics.org/files/research/539/Regional-REPORT-ENG-WEB-1.pdf.
[28] Tauras, J. et al. (2014), Is the Cigarette Price Effect Nonlinear?, Tobacconomics, https://tobacconomics.org/files/research/164/Tauras_PriceLinear_SCTC_Sept2014.pdf.
[27] Vermeulen, S., M. Dillen and J. Branston (2020), Big Tobacco, Big Avoidance, The Investigative Desk, https://www.bath.ac.uk/publications/big-tobacco-big-avoidance/attachments/Big_Tobacco_Big_Avoidance.pdf.
[3] WHO (2023), WHO report on the global tobacco epidemic 2023: Protect people from tobacco smoke, World Health Organization, https://www.who.int/publications/i/item/9789240077164.
[33] WHO (2021), Examples of current practices in the implementation of Article 12 (free zones and international transit) of the protocol to eliminate illicit trade in tobacco products, World Health Organization, https://iris.who.int/handle/10665/340212.
[31] WHO (2021), WHO report on the global tobacco epidemic 2021: Addressing new and emerging products, World Health Organization, https://www.who.int/publications/i/item/9789240032095.
[2] WHO (2021), WHO technical manual on tobacco tax policy and administration, World Health Organization, https://www.who.int/publications/i/item/9789240019188.
[38] WHO (2018), Report of the Panel of Experts on the Protocol to Eliminate Illicit Trade in Tobacco Products, World Health Organization, https://fctc.who.int/publications/m/item/report-of-the-panel-of-experts-on-the-protocol-to-eliminate-illicit-trade-in-tobacco-products-technical-documents.
[39] WHO (2013), Protocol to eliminate illicit trade in tobacco products, World Health Organization, https://iris.who.int/bitstream/handle/10665/80873/9789241505246_eng.pdf?sequence=1.
[7] World Bank (2024), World Bank Open Data, World Bank, https://data.worldbank.org/ (accessed on 13 January 2024).
Year of measure introduction (year of measure reform)
Note: BP1 (affordability) and BP12 (sale regulations) have not been included in the table. Blank cells indicate that there were no measures introduced that align the tobacco tax system with the WHO tobacco tax policy best practices in a moderate or complete manner between 2000 and 2022. Some countries have implemented measures that align moderately with one or multiple BPs and then have later in time introduced measures that weaken the implementation of the BP. As a result, there are some measures included in the table, while the country scores below the moderate level of compliance in 2022 in Table 4.1 of Chapter 4 (e.g., Bolivia for BP9). The information for BP2 corresponds to a tobacco excise tax increase that contributes to country’s compliance with an excise tax share of at least 50% of the total tobacco tax share in 2022. Progress on BP5 corresponds to the ban of sales of new tobacco and nicotine products in the following countries: Argentina (ENDS and ENNDS only, 2011), Brazil (2009), Mexico (2022), Nicaragua (ENDS and ENNDS only, 2021), Panama (2022) and Uruguay (ENDS and ENNDS only, 2009). Costa Rica started to levy an excise tax on e-cigarettes in 2022, and Ecuador in 2019. Heated tobacco products are taxed in Colombia (since 2018), Paraguay (since 2019) and Peru (since 2019).
Source: OECD based on national legislation listed in country notes (Chapter 6); WHO report on the global tobacco epidemic (WHO, 2023[3]).