The high health costs of smoking are well established and some 120,000 persons die from smoking each year in the UK alone and some 4 million globally. Half of regular cigarette smokers die from the habit losing on average two to three decades of life. Most deaths are of lower income groups and smoking is a major factor in health inequality.

  Gains have been made with prevalence having fallen by some 40 per cent over 25 years and indications that there may be a recent real reduction in underage smoking, but still 28 per cent of adults smoke.

  Price and taxation are potent factors in tobacco control particularly for the groups such as young people and those on lower incomes who are less responsive to other measures.

  The World Bank Report on Economics and Tobacco Control, puts raising tobacco taxes as the primary strategy to curb the epidemic of smoking deaths, and to deter children from smoking.

  It concludes that the major factors encouraging smuggling are:

—  criminal organisation;

—  the sophisticated distribution system which has grown up to support smuggling;

—  the lack of control over the intermediate movements of cigarettes and the temporary suspension of duty and VAT during transit;

—  poor law enforcement against illegal sales;

—  where there is difficulty identifying between legal and illegal packets of cigarettes.

  The World Bank Report's recommendations to combat cigarette smuggling are to have:

—  prominent tax stamps;

—  warnings in local language;

—  severe penalties for those caught;

—  all parties in the distribution chain licensed (manufacturers, distributors and retailers as is the case in France and Singapore);

—  tracking by serial number;

—  manufacturers responsible for the final destination of the product (as in Hong Kong);

—  exporters to label packs with the final destination;

—  increased resources for anti smuggling activity (they quote UK).

  "Smuggling is a serious problem, but the report concludes that, even where it occurs at high rates, tax increases bring greater revenues and reduce consumption. Therefore, rather than foregoing tax increases, the appropriate response to smuggling is to crack down on criminal activity".

World Bank Report, Curbing the Epidemic. Economics of Tobacco Control, Washington DC. June 1999.

  Nearly all the World Bank analyses and recommendations are pertinent to the UK situation. The evidence is clear that the vast majority of smuggling is of non taxed cigarettes which is where the higher profits are to be made. The tobacco manufacturers exploit and at least collude with smuggling. In many countries they lobby for taxes to be lowered arguing that this will reduce smuggling and increase government tobacco revenue. They have succeeded in persuading some governments to reduce tobacco taxes such as in Canada and Sweden, where the result has been an increase in smoking and a decrease in tax revenue.

  Marginal tax increases will not increase the incentive to smuggle but will still result in a decrease in smoking and increase government revenue.

  Tax decreases (by actual reduction or erosion by inflation) will not decrease incentive to smuggle but will increase smoking and decrease government revenue.

  The UK government has excellent tobacco control policies planned, albeit they might be strengthened by more resources to combat smuggling. It would be a public health disaster if the government were to cave in to tobacco industry pressure to freeze or lower taxes. This is clearly in the tobacco industry interest, but not that of public health or public revenue.

REFERENCES

  1.  World Bank Report, Curbing the Epidemic. Economics of Tobacco Control, Washington D C. June 1999.

  2.  Secretary of State for Health, Smoking Kills, a White Paper on Tobacco, HSO 1998.

  3.  Townsend J. The role of taxation policy in tobacco control. In Abedian I, van Merwe R, Wilkins N,Jha P. The Economics of Tobacco Control: towards an optimal mix policy. University of Cape Town Press 1998.

  4.  Townsend J. Price and consumption of tobacco. British Medical Bulletin, 1996; 52: 132-142.

December 1999

  From World Bank Report