Argentina Receives Bloomberg Philanthropies Award for Global Tobacco Control at WCTOH in Cape Town, South Africa
Today, Bloomberg Philanthropies lauded Argentina for its work to reduce tobacco use and raise tobacco taxes at its biennial Awards for Global Tobacco Control. Argentina was recognized, along with governments and civil society organizations of five other countries (Vietnam, El Salvador, Mexico, Senegal and Uganda) for its commitment to reducing the health and economic burden of tobacco related diseases. The policy efforts of Argentina relied on a unique collaboration between the Ministry of Finance, the Ministry of Health, and civil society organizations in the reform efforts. In the ceremony today in Cape Town, South Africa, the Ministry of Finance, Ministry of Health and FIC Argentina, a civil society organization, jointly accepted the award.
After the 2015 presidential elections, the political map in Argentina changed radically, and President Mauricio Macri designated Alfonso Prat-Gay as the new National Minister of Finance. The Ministry benefitted from the research of FIC Argentina, including an updated analysis of cigarette demand and affordability; updated technical and political proposals on tax increases in Argentina; and, simulations on the impact of tax increases on prices, consumption, government revenues and the tobacco subsidy (Special tobacco fund or FET).
The Ministry of Finance's advisory team explained that Government had the intention to promote a tax increase bill in the National Congress in 2016. On December 30th, Dr. Prat-Gay announced the renewal of the Emergency Additional Tax (IAE in Spanish), but only through April 30 since he also stated that Government wanted to promote a comprehensive discussion on tobacco taxation policy. During the following months, FIC Argentina and the Ministry advisory team had several technical meetings to develop documents on price variation, brand substitution, product substitution, tax structure reform, and tax increases.
On April 29th, 2016, the Ministry of Finance issued a press release announcing two executive decrees: the IAE renewal and an increase of the Internal Tax on cigarettes (Impuestos Internos al cigarillos in Spanish) from 60% to 75%. The 15% increase in the cigarette Internal Tax increased cigarette prices by 50%, which reduced cigarette consumption by 15%. With the tax increase, Argentina reached the 70% tax share in price benchmark, recommended by the World Health Organization.
Though Argentina has made significant progress in raising tobacco prices through tax policy, and this merits recognition, there is still much work to be done.
First, the current reforms still need to be amended by Congress.
Second, this is an ad valorem tax increase, which allows the tobacco industry to expand price gap between cheaper brands and premium brands, reducing the effectiveness of the tax policy.
Third, this tax increase is only applied to cigarettes, encouraging substitution to other tobacco products.
But for now, congratulations to Argentina, and we look forward to continuing to support tobacco tax reforms in Argentina and the rest of the world through original and relevant research.