In this way, the region could reduce its widespread consumption and the costs it entails for society if the design and administration of tobacco taxes were improved.
In its new report Tobacco Taxation in Latin America and the Caribbean (LAC), the Organisation for Economic Co-operation and Development (OECD) recommended increasing tobacco excise tax rates to improve the effectiveness of tobacco tax policy and administration in LAC countries. In this way, the region could reduce widespread tobacco consumption and the costs it imposes on society by improving the design and administration of tobacco taxes.
The publication concludes that the social and economic costs of tobacco use in LAC countries far outweigh the revenue raised through tobacco taxes. A well-designed tobacco tax policy is a cost-effective tool to counteract the impact of tobacco use, and LAC countries have ample room for improvement in the design and administration of these taxes.
"Taxes play a crucial role in reducing the social and economic costs associated with smoking," said OECD Secretary-General Mathias Cormann. "Governments should ensure that they maintain and, if necessary, strengthen the role of tobacco taxes."
Although LAC countries have been aligning their tobacco tax policies, albeit partially, with the best practices of the World Health Organization (WHO), progress in the reform of tobacco excise taxes has stagnated since 2012, leaving significant room for improvement. Common shortcomings in the design of tobacco excise taxes include the lack of mechanisms to ensure payment of a minimum tax rate and the fact that these taxes are not applied consistently to different tobacco products, including novel tobacco and nicotine products.
In 2021, more than 350,000 people died in LAC countries as a result of tobacco use or exposure to second-hand smoke, and more than 40% of respiratory cancer cases detected in the region were attributable to tobacco use (Global Burden of Disease Study, 2021). Thus, medical costs associated with smoking can reach an average of 1.5% of annual GDP.
Tobacco use remains widespread in LAC, currently used by 12% of the population. It is particularly high among men, with a prevalence three times higher than that of women. In half of LAC countries, the prevalence of tobacco use among young people aged 13 to 15 is higher than among the adult population.
Cigarettes, the most widely consumed tobacco product in the region, are generally very affordable and have increased in affordability over time. The effective tax burden on cigarettes remains below the WHO-recommended threshold of at least 75% of the retail price. In the short term, an increase in tobacco taxes will tend to have a positive impact on revenue, even if tobacco consumption declines, as smokers tend to change their consumption habits gradually. In the long term, the reduction in health, economic and social costs resulting from a decrease in tobacco consumption would more than offset the decrease in revenue, resulting in a positive impact on the public budget and a healthier population.
