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Raising Taxes on Tobacco Generates Revenue And Saves Lives

The government needs funds to invest in the infrastructure and social sectors

With the Covid-19 pandemic hitting the country’s economy hard, preparation of the Union budget for the next fiscal is a big challenge for the government this time.

To set a course for economic recovery, the government needs funds to invest in the infrastructure and social sectors. Due to a slow-down in the economy, the government is compelled to inject stimulus packages. However, the government’s revenue collection has taken a considerable dip too. The treasury is thus facing an uphill task.

Experts in the Finance Ministry have been looking at various suggestions to prepare a budget that can set the pace for recovery of the economy with various policy interventions. Raising taxes on all tobacco products is one of the options available to them. It will help generate additional revenue at this time of crisis. It will also prove to be an effective policy intervention to reduce tobacco use in India and save millions of lives.

The annual economic costs from all diseases and deaths attributable to tobacco use in India for the year 2017-18 amounts to Rs. 177,341 crore which is 1 percent of India’s GDP. If we take this estimate into consideration, the economic cost from all tobacco products may come around Rs 1.80 lakh crore today.

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Raising the tax on tobacco products can fetch annual revenue of nearly Rs 49,000 crore and significantly reduce their consumption as well. The government can utilize the additional revenue in strengthening health promotion and prevention programs amid the pandemic.

At present, the average price of cigarettes is Rs 127 per pack of 10 cigarette sticks. The government can levy an excise tax of Rs 4,170 per 1000 sticks of cigarettes and generate additional tax revenue of Rs 27,423 crore. Cigarette consumption will go down by 22 percent, as prices will increase, experts say.

The current average price of a pack of 100 gm smokeless tobacco products is Rs 102. The government can generate additional revenue of Rs 3,044 crore by raising the tax burden to 76 percent. It will reduce smokeless tobacco consumption by 29 percent.

Hand-rolled cigarettes, called ‘bidi’, are the widely used tobacco product in India as they are cheap. The government must significantly increase the tax on bidi as well to cut down their consumption.

Tobacco Taxes
The government should increase taxes on all tobacco products. Pixabay

The average price of bidi is Rs 20 per pack of 25 sticks. The government will get additional revenue of Rs 18,249 crore by levying 50 paise tax per bidi stick. This will reduce bidi consumption in-country by 24 percent, experts say.

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An increase in tax on tobacco products is the need of the hour. Not just to generate additional revenue, but to save millions of lives as well. Raising taxes will also help address the co-morbidities of tobacco use and the COVID-19 pandemic in India as it will reduce consumption.

Tobacco use is a major risk factor for cardiovascular disease, cancer, chronic lung disease, and diabetes. People with these medical conditions are at a higher risk for developing severe illness when infected by the Covid-19. Tobacco use is also a prominent risk factor for infectious diseases like tuberculosis and lower respiratory infections. Tobacco users are more vulnerable to Covid-19 infection. Various studies have noted how tobacco use leads to severe Covid-19 manifestations and adverse outcomes. Smoking impairs immunity, making smokers particularly vulnerable to Covid-19. As both smokeless tobacco use and smoking vastly increases susceptibility and spread of Covid-19, the government has put certain restrictions on the use of tobacco products as part of its measures to check the spread of the deadly virus.

It is a well-established fact that tobacco is the foremost preventable cause of death and disease in the world today, killing half of the people who use it. It is a global epidemic, killing about 80 lakh people the world over. India is the second-largest consumer and third largest producer of tobacco.

According to the Global Adult Tobacco Survey of 2018, while India is home to over 26 crore tobacco users, tobacco use kills at least 12 lakh Indians each year. Every third adult in rural areas and every fifth adult in urban areas uses tobacco in some or other form. The most commonly used tobacco product in India is khaini, a mixture of lime and tobacco. Every ninth adult or 11.2 percent of tobacco users is addicted to Khaini.

At least 7.7 percent of adult tobacco users smoke bidi, 6.8 percent of tobacco users chew Gutkha, a mixture of tobacco, lime, and areca nut. The percentage of tobacco users who chew betel quid with tobacco comes at 5.8 percent. The prevalence of tobacco use among men is 42.4 percent while it’s 14.2 percent in women.

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Looking at the scale of tobacco use in the country and its adverse impacts, the government should increase taxes on all tobacco products. Various studies indicate that a significant increase in tax on tobacco products significantly reduces their consumption too. (IANS)

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