2023 Brings Tobacco Tax Increases Around the World
We covered a lot of ground on the blog in 2022 reviewing the evidence on tobacco taxation in various regions around the world. Across these vastly different policy environments, two things hold true: tobacco use continues to cause enormous harm, particularly among youth and low-income families, and taxation remains the most cost-effective, evidence-supported tobacco control tool to counter those harms. As we last discussed on the blog in July, many countries took steps towards improving tobacco control through increased taxation in 2022. While this progress needs further acceleration to adequately slow the tobacco epidemic, we’re encouraged to note several additional tax increases which are taking effect around the world as we ring in 2023.
Beginning in Asia, Indonesia continues its sustained increases in tobacco taxation with an additional 10-percent increase effective as of January 1, 2023. The government also announced rates will increase by an additional 10 percent in 2024 as part of an ongoing effort to reduce youth smoking. Pakistan increased the federal excise duty on cigarettes from PKR 33 to PKR 41 for the low-priced tier and from PKR 104 to PKR 130 for the high-priced tier, with a weighted average increase of 24.5 percent. This change is estimated to generate additional revenue of PKR 25.2 billion, which includes PKR 19.1 billion increase in the FED and PKR 6.1 billion in the General Sales Tax. In Kazakhstan, increased taxes on all forms of tobacco products took effect, with plans for further increases in 2024. These changes bring the tax share of price for cigarettes to the recommended 70 percent threshold in Kazakhstan, and are expected to generate an additional KZT 75 billion in revenue. Turkmenistan raised tobacco excise taxes prior to the new year, with the rate increasing from USD 15.60 per 1 kg to USD 19.50 per 1 kg in August 2022.
While the European Union has been debating a landmark update to its Tobacco Tax Directive, which we hope will significantly increase the minimum tax on tobacco products throughout the bloc and improve tax structure, several countries in the region have taken steps to increase taxes on their own, including EU member countries France, Germany, Ireland, Poland, and Spain. France continued its annual efforts to increase cigarette prices, announcing the indexing of the price of cigarettes to inflation. In Germany, cigarette taxes increased on January 1 as part of a 5-year plan of moderate tax increases which some anticipate will increase the price of a pack of 20 cigarettes by around 8 cents in 2023. In Ireland, the excise tax on a pack of 20 cigarettes increased by EUR 0.50, a change expected to increase prices to around EUR 15.80 for a premium pack of cigarettes, and EUR 13.80 for an average pack. Poland, which has historically levied some of the lowest cigarette taxes in the EU, increased the specific excise rate on cigarettes by 10 percent and plans to increase the rate an additional 10 percent annually through 2027 with the goal of reaching a target rate of EUR 150 per 1,000 sticks. Though nominal, Spain announced a 0.3 percent increase in its tobacco tax in 2023, which is expected to generate EUR 6,367 million.
In Eastern Europe, EU candidate Moldova increased the tax on tobacco products by 25 percent at the start of the year, a change expected to increase revenue by MDL 618 million in 2023. Ukraine continued its 20-percent per year increases on tobacco excise rates to align its tobacco tax more closely with the EU directive. The annual rate increases are legislated for the period 2021-2025. Belarus set out a series of three gradual price increases on cigarettes in 2023. As of January 1, the tax increased from BYN 43.56 to BYN 55.6 rubles per 1,000 cigarettes, with additional increases scheduled for July and October 2023. Additionally, Romania’s proposed tax increase we reported in July was approved, raising the excise tax on cigarettes by roughly five percent.
Further south, Turkey’s special consumption tax automatically increased by 22.29 percent on January 3 in line with the domestic producer price index. Morocco continued its five-year plan to gradually increase tax on tobacco products with a MAD 1 to MAD 2-increase per pack at the start of the year, a change that is expected to increase revenue by 6 percent.
Finally, in Latin America, Mexico updated its Special Tax on Production and Services (IEPS) from MXN 0.5484 to MXN 0.5911 per cigarette in 2023 to keep pace with inflation. Taxes on tobacco will increase in Nicaragua as well, with Ministerial agreement 018-2022 increasing the tax on cigarettes by NIO 392 per 1,000 cigarettes and the tax on cigars, cigarillos and chopped tobacco by NIO 262 per kilogram. These new rates are applied as of January 1. Similar changes were announced in Uruguay, where the Internal Specific Tax applied to tobacco increased 6.8 percent at the beginning of 2023.
Tax increases like these, ideally in combination with other improvements to tax structure and implementation, are key to reducing tobacco consumption. While the policy shifts in these eighteen countries represent some momentum to continue reducing tobacco-related harms in 2023, tobacco remains affordable and accessible in most countries, posing a continued economic cost and threat to public health. Inflation continues globally, making it particularly important for more countries to increase their tobacco taxation and ensure that harmful products do not become relatively more affordable. As we discuss in the Cigarette Tax Scorecard, countries can best decrease consumption, new uptake of smoking among youth, and the health and economic harms from consumption and secondhand exposure by improving tax structure, regularly adjusting rates to outpace inflation and economic growth, and increasing excise rates to at least 70 percent of retail price. We hope to be able to share even more substantive policy changes like these over the next year.