Tax avoidance and tax evasion. In WHO technical manual on tobacco tax administration. pp. 77-80
Publication Source

World Health Organization

Book chapter

Studies consistently show that raising taxes on tobacco is the most cost-effective measure for reducing tobacco use. But now that we know that increasing the price of tobacco reduces the burden of the tobacco epidemic,
what next? As a practical matter, how can tobacco taxes be raised? Countries, particularly low- and middle-income nations, are struggling for answers because of limited capacity and persistent fears that tax increases are difficult to implement and will lead to all kinds of disastrous consequences like an uncontrolled illicit market, increased unemployment, reduced revenue or an unfair burden on the poor.

Evidence shows that a well-administered tobacco tax leads to the desired result of reducing consumption and its crippling health consequences, and not producing the terrible economic outcomes often portrayed by the tobacco industry. In fact, increased tax and prices for tobacco actually benefit governments by increasing revenues, which can then be used for state services, such as healthcare. This win-win result of reducing consumption and increasing revenues should be embraced during this period of economic hardship, when governments face increasing needs to find new ways to fund spending, particularly for health care. Tobacco taxation is a simple and effective means of increasing revenues without adverse effects on the economy.

This manual aims to provide readers, particularly policy-makers based in ministries of finance, with the relevant instruments for implementing an effective and efficient tax on tobacco products. It provides an overview of the different types of taxes applicable to tobacco, their strengths and weaknesses, and examines the different technical as well as political challenges faced in terms of their implementation. Finally, it provides a list of best practices that will help maximize the public health benefits of higher tobacco taxes while producing new tax revenues for at least the short- to medium-terms.