3 Questions About Cigarette Taxes?>
Expert Q&A

3 Questions About Cigarette Taxes

by Jeanine Barone  

teh-wei hu imageTeh-Wei Hu, PhD,is professor emeritus of health economics at the University of California, Berkeley, and a member of the editorial board of Berkeley Wellness and the UC Berkeley Wellness Letter. He studies tobacco policy and the economics of tobacco control and was instrumental in getting China to enact a cigarette tax increase a year ago.

It’s been a year since the Chinese government raised its tax on cigarettes. Can you tell me what’s happened in terms of the success?

It was a really difficult task to convince the Chinese government to raise the cigarette tax. The government owns the tobacco industry. One side of the government said, “Why do we want to reduce our sales?” I was the one who started the tax issue and it took 20 years to raise the cigarette tax in China. It’s been one year, as of May 2015. And I went to China and participated in its annual evaluation. In China there are 900 brands of cigarettes. Prices run from 40 cents to $15 per pack. There are a wide range of prices and five classes of cigarettes: classes 1 and 2 are the most expensive; classes 4 and 5 are cheaper. The tax increase was 15 cents per pack on average, or 10 percent. It’s a small amount. But sales decreased by 3 billion packs in one year—a drop of 3 percent. This is the first time ever that China had a reduction in tobacco sales.

We don’t know from these numbers how many people in China have quit smoking. We know there are 350 million smokers in China. We estimate that at least 1 million will quit as a result of the tax increase, including young people who would delay initiating smoking because of the cost.

You're now doing work in Africa, where tobacco companies are moving in to take advantage of cheap labor and a new untapped market, given the historically low smoking rates there. Can you tell us a bit about that?

The smoking rate in East Africa is low: 22 percent for men and 4 percent for women, or an average of 12 percent. The international tobacco companies are trying to expand their market there. In the last four years, I've been involved in Tanzania; I have an NIH grant to look at the economics of tobacco control in Tanzania. In the U.S., Canada, and other countries, there has been a reduction in the production of tobacco leaves. To fill the gap, tobacco farmers in Tanzania have doubled their production of tobacco leaves. There’s cheap labor and they’re exporting the product to the U.S., U.K., Japan, and other cigarette-producing countries. My project will encourage the Tanzanian government to raise the tax on cigarettes and encourage tobacco farmers to switch to growing other crops, such as maize, fruits, and peanuts.

In one of my other studies, which is funded by the Bill & Melinda Gates Foundation, my colleagues and I are looking at women’s role in tobacco farming in Africa, including whether women in Tanzania have been exploited. We have previously found this to be the case in Kenya.

?What else would you like readers to know about cigarette taxes, based on your work?

Raising the price of cigarettes is one of the most effective ways to get people to quit or not initiate smoking. It’s also good, of course, to prohibit smoking in public places, put a warning on the label and so forth. The tobacco tax is very cost-effective. And it’s a win-win. The government gets more revenue that can help people with health care—assuming that is how they choose to spend it. To that end, I have a second proposal in China to earmark the tax for three things: health care, aid to low-income people, and helping farmers to transfer from growing tobacco to other crops.

This opinion does not necessarily reflect the views of the UC Berkeley School of Public Health or of the Editorial Board at BerkeleyWellness.com.

Also see How Big Tobacco Hurts World Health and Raise Tobacco Taxes, Help Kids.