Cigarettes becoming more affordable in ASEAN; higher tobacco taxes needed

Jakarta, 10 June 2013:  Cigarettes are becoming cheaper and more affordable for most residents of Southeast Asia, the latest study from the Southeast Asia Tobacco Control Alliance (SEATCA) says, underscoring the need for stronger and more effective tobacco tax policies across the region to curb tobacco use while also raising government revenues.

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The report “Affordability of Cigarettes and the Impact of Raising Tobacco Excise Taxes in the Southeast Asian Region”looked into cigarettes prices and the effects of raising tobacco excise taxes in six Southeast Asian countries: Cambodia, Indonesia, Philippines, Lao PDR, Thailand, and Vietnam). The data, drawn from individual country reports in 2012 under SEATCA’s Southeast Asia Initiative on Tobacco Tax (SITT) shows that:

  • Cigarettes have become relatively cheaper and more affordable in Southeast Asia relative to the rise of gross domestic product (GDP) and population income in all six countries surveyed.
  • The Relative Income Prices (RIPs) of cigarettes in the six countries have steadily decreased over the past decade, except in Thailand; still, RIPs in all countries, including Thailand, are very low (6% or less of per capita GDP) with the Philippines having the lowest RIPs and Vietnam having the highest.
  • By comparing cigarette prices per pack as a percentage of daily minimum wages, all countries, except Thailand, show stable or declining trends (below 15%), with extremely low percentages in Indonesia.

SEATCA draws from international experience, which has established that higher prices driven by tax increases on tobacco products will help reduce tobacco use while also raising greater revenues for governments. Higher taxes that make tobacco products less affordable, particularly for the youth and the poor, will discouraging them from smoking and in the long run reduce the disease burden and health care costs that governments must face.

“As tobacco products are becoming more affordable in developing countries, national governments should ensure that excise taxes are indexed to inflation and significantly high enough (at least 70% of retail price) to discourage initiation among youths and curb current smoking.  In Indonesia, the current tobacco tax burden relative to retail price is 46 percent.” Mr. Abdillah Ahsan, Economics Professor, Demographic Institute, Faculty of Economics-University of Indonesia said.

Given its latest findings on cigarette affordability in Southeast Asia, which was launched in Jakarta on June 10, SEATCA and the Demographic Institute FE-UI urged ASEAN governments to:

  • raise tobacco taxes immediately and regularly so as to reduce the affordability of tobacco products, achieving both the fiscal and public health objectives of excise taxation.
  • strengthen tax administration and tax enforcement, which should go hand-in-hand with tax increases in order to effectively control tax non-compliance

(ENDS)

Contact: Mr. Abdillah Ahsan, Demographic Institute, Faculty of Economics, University of Indonesia,ahsanov@yahoo.com or Ms. Joy F. Alampay, SEATCA, Email: joy@seatca.org, Mobile:  +639175326749.  *full report is available at www.seatca.org or contact Ms. Sophapan Ratanachena sophapan@seatca.org, for more information.