Death and Taxes

Prabhat Jha
Centre for Global Health Research (CGHR) Li Ka Shing Knowledge Institute St. Michaels Hospital, Dalla Lana School of Public Health, y University of Toronto On behalf of the Tobacco Economics in India group and the Million Death Study Collaborators Support: Bill and Melinda Gates Foundation, NIH, CIDA

prabhat.jha@utoronto.ca Twitter: @Cghr_org

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank( ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

CGHR.ORG

Take tobacco seriously: big cause of death and big cause of poverty Focus on adults stopping as well as kids Triple excise tax on tobacco: would sharply raise retail price, get at least 30% of current smokers to quit (and prevent kids from starting), and raise more tax revenue Know and refute objections to higher tax: (i) harms the th poor- h lth gains are pro-poor and tax b d health i d t burden on the poor might not increase; (ii) smuggling-

4 Actions to save at least 100 M lives A i l li

CONCLUSIONS:

CGHR.ORG

counter with labels with tax stamp smart labels stamp, labels, and coordination Source: Jha, et al EPW

A billion tobacco deaths in the 21st century on current smoking patterns t t ki tt

CGHR.ORG

Source: Peto et al, Nature Med 2006; Jha, Nature Cancer Reviews, 2009

Richard Doll: mortality and smoking in male British doctors born 1900-30
34,000 men recruited in 1951 & followed up to 2001
Moderate hazard for smokers born 1851 1899 as they 1851-1899, did not smoke substantial numbers of cigarettes when young Bigger hazard for smokers born 1900-1930: about HALF eventually killed by tobacco Those who stopped before age 40 (preferably well before 40) avoided nearly all the excess risk in later middle age
CGHR.ORG

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USNHIS:Malesage35+,recruited 1997 2004,followupuntil2006 19972004 follow up until 2006

10 years

CGHR.ORG

USNHIS:Femalesage35+,recruited 1997 2004,followupuntil2006 19972004 follow up until 2006

10 years

CGHR.ORG

CGHR.ORG

USNationalHealthInterviewSurvey
19972004cohort,followedformortalitythroughthe endof2006 end of 2006 about106Kmenwith8Kdeaths about136Kwomenwith9Kdeaths about 136K women with 9K deaths womensrisksrepresenttheapproximatecohortof thosewomenwhobegansmokingearlyinlifeand continuedsmokingthroughmiddleage(unlikeearlier CPS2cohortdoneinthe1980s).
CGHR.ORG

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THE MILLION WOMEN STUDY

All-cause mortality
Ex-smokers and current smokers
3.1

2.1 1.7 17 1.06 1.2

CGHR.ORG

Over 1.3 million (M) quitters in Canada, 1999-2009 age 15+

Year
1999 2009

Ex-smoker
6.1 M (50%) 7.4 M (60%)

Current
6.1 M (50%) 4.9 M (40%)

Never
11.9 M (49%) 15.4 M (56%)

CGHR.ORG

Source: Jha et al, forthcoming

CGHR.ORG

CGHR.ORG

Main causes of trends in recent decades

Lung: smoking g g

Colorectal: treatment Stomach: Unknown

CGHR.ORG

GATS1 (orange) in 14 countries, B,R,I,C, + 10 other LMICs GATS+US+UK: 16 countries 4B population 2.3B age countries, population, 2 3B <35 Of 2.3B age<35, 0 5B either smoke, or will smoke b 2 3B <35 0.5B ith k ill k by age 30 (at current 25-34 prevalences): 450M male, 50M female female.
GATSPhaseI: 14countries 14 countries

CGHR.ORG

GATS+US+UK: 16 countries 4B population 2 3B age countries, population, 2.3B <35 Of 2.3B age<35, 0 5B either smoke or will smoke by 2 3B age<35 0.5B smoke, age 30 (at current 25-34 prevalences): 450M male, 50M female. If 500M smoke at 30 (mostly starting before age 20) ~250M will eventually be killed by it, unless they 250M quit.

CGHR.ORG

GATS+US+UK: 16 countries, 4B population, 2.3B age <35 Of 2.3B age<35, 0.5B either smoke, or will smoke by age 30 (at current 25-34 prevalences): 450M male, 50M female. If 500M smoke at 30 (mostly starting before age 20) ~250M will eventually be killed by it, unless they quit. it If they dont start, or stop before age 40 (preferably well before 40), >90% of th ll b f 40) 90% f these t b tobacco d th will be deaths ill b avoided CGHR.ORG

GATS+US+UK: 16 countries, 4B population, 2.3B age <35 Of 2.3B age<35, 0.5B either smoke, or will smoke by age 30 (at current 25-34 prevalences): 450M male 50M male, female. If 500M smoke at 30 (mostly starting before age 20) ~250M will eventually be killed by it, unless they q quit. For those now 25-34 (born ~1980), many deaths before 2050 For those now <20 (born ~2000), most tobacco deaths CGHR.ORG >2050

Chinese cigarette increase 40 years after US increase

US adults,1910-1950 Year 1910 1930 1950 g Cigarettes per day 1 4 10 China (men),1950-1990 Year 1952 1972 1992 Cigarettes g per day 1 4 10

Delayed hazard: proportion of all deaths at ages 35-69 due to tobacco 35 69

US: all adults 1950 12% CGHR.ORG 1990 33% China (men only) 1990 12% 2030 ~33%

CGHR.ORG

China is the largest cigarette producer d

CGHR.ORG

2012-6-15

23

INDIA: Years of life lost among 30 year old smokers *

Men who smoke bidis Women who smoke bidis Men who s o e c ga ettes e o smoke cigarettes 6 years 8 years 10 yea s 0 years

* At current risks of death versus non-smokers adjusted for age alcohol use and education non-smokers, age, (note that currently, few females smoke cigarettes)
CGHR.ORG

Source: Jha et al, NEJM, Feb 2008

CGHR.ORG

Source: Jha et al, NEJM, Feb 2008

Deaths from smoking in year 2010 in India, I di ages 30-69, b di 30 69 by disease

Women Disease
Respiratory disease Tuberculosis Heart disease/stroke Cancer
Total deaths: 2.0 M No. ( (% all deaths) No.

Men
Total deaths:2.9 M ( (% all deaths)

26,000 14,000 13,000 9,000 9 000

10 9 3 4

109,000 120,000 152,000 67,000 67 000

31 38 20 32

TOTAL, all diseases

CGHR.ORG

93,000

579,000

20

Source: Jha et al, NEJM, Feb 2008

Cigarette displacing bidis

40% 35% 30%
Cigarettes Bidis

0.85 0.74

ASRGATS / ASRSFMS
(99% CI)

(0.69-0.79)

(0.78-0.92)

*
1.00
(0.87-1.14)

1998

* Indicates p-value < 0.01

1998 2010

1998 2010

Smo oking preva alence

0.83

(0.79-0.87)

25% 20% 15% 10% 5% 0% % 15 29 30 44 45 59 60 69 15 69

3.46 1.59

(1.41-1.79)

2010

1.66

(1.43-1.93)

*
1.94

1998

(2.71-4.43) (0.80-1.08)

0.93

2010 2010

1.89 1 89

(1.42-2.51)

(1.77-2.12)

2010

2010 1998 2010 1998 2010 1998 1998 1998 2010

1998

Absolute number CGHR.ORG of smokers (in millions)

Age group
Cigarettes Bidis Cigarettes Bidis Cigarettes Bidis Cigarettes Bidis Cigarettes Bidis

Bidi and cigarettes are more affordable in India

AffordabilityofTobaccoProducts,19902011
300.0 Bidi Cigarette 250.0

1 990 100 0=

200.0

150.0

100.0

50.0 50 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year

CGHR.ORG

CGHR.ORG

Source: Jha et al, NEJM, Feb 2008

Methods:
Copenhagen Consensus: 15-20 challenge papers on b d development topics broad d l tt i Each paper estimates costs and benefits of specific interventions Panel of economists, judging best buys for the world CC12- Analytic team on chronic disease used WHO EPIC model

CGHR.ORG

Economic costs of tobacco, 2010-30 2010 30

Costs (trillions 2010 $) from 2010 2030 (trillions, 2010-2030
Region/Disease Vascular Cancer Chronic Lung Total Total due to tobacco

Low and middle income High income World

9 7 16

5 3 8

2 3 5

16 13 29

7 6 13

CGHR.ORG

World GDP about $63 trillion, thus, about 1.3% of GDP on annual basis, or roughly $0.9 trillion in 2010 terms * Method: labour and capitol impact on lost output, using WHO EPIC model and % due tobacco Source: Jha, Bloom et al, for CC12, 2012

Technology + diffusion have reduced marginal costs for maximal child survival. But marginal g costs for maximal adult survival are rising
$500 GDPpercapita($2005,PPP P) $400

C Critical inc come per capita in c 20 PPP 005

Adult male 15-59

$300

Adult female 15 59 15-59

$200

$100

Child <5
$0 1965 1975 1985 year 1995 2005

Critical incomes is real $ needed to achieve of maximal survival (in that year) from 1970 to 2007; note higher adult costs due in part to HIV CGHR.ORG and tobacco; Source Hum et al, in press

Cost-benefit returns from selected investments

Priority Area 1. Tobacco taxation 2. Acute management of heart attacks with lowcost drugs 3. Salt reduction 4. Hepatitis B immunization for liver i i ti f li cancer or cirrhosis 5. Secondary prevention of heart attacks & strokes with generic risk pill CGHR.ORG Benefit Cost Ratio 40:1 25:1 Annual Costs Annual Benefits ($billions) (M=millions) 0.5 0.2 1 M deaths averted or 20 M DALYs 0. 3 M deaths averted each year or 4.5 M DALYs 1 M deaths averted or 20 M DALYs 0. 15 M deaths averted each year or 3 M DALYs h DALY 1.6 M deaths averted or 108 M DALYs averted

20:1 10:1

1 0.1

3:1

32

commodities which are no where necessaries of life, which are become objects of almost universal j consumption, and which are therefore extremely proper subjects of taxation
CGHR.ORG

"Sugar rum, and tobacco are Sugar, rum tobacco,

Adam Smith on tobacco tax

Source: An Inquiry into the Nature and Causes of The Wealth of Nations, Book V, Chapter III, pages 474-476, 1776;

France 1980-2005: cigarette prices tripled, p , consumption halved, tax revenue doubled
6.0 Nu umber/adult/day and death rates d s 5.5 55 5.0 4.5 4.0 3.5 3.0 30 2.5 2.0 1.5 1.0 1980 1985 1990 1995
Year
CGHR.ORG

# cigarettes/adult/day g y

300 Price (% relative to 1980)

250

200

150

Relative price
100

50 2000 2005 2010

Source Jha 2009, Hill 2010

CGHR.ORG

France 1980-2005: cigarette prices tripled, p , consumption halved, tax revenue doubled
Government income from tobacco, 14 12

10 B illions 2007 euros s,

0 1960 1970 1980 1990 2000 2010

CGHR.ORG

Tax structure: importance of excise tax

Analyses of EU 1998-2007 Greater reliance on specific tobacco excises will:
Reduce gap in prices between high and low priced cigarette brands (ad valorum increases gap) Produce more stable, predictable stream of cigarette excise tax revenues Have greater impact on cigarette smoking

Mexicos structure (oligopoly with Phillip Morris and BAT) works in favour of higher excise Maximal health and revenue impact involves specific taxes, regularly adjusted for inflation, comparable on all tobacco products and complementary policies to reduce industry price manipulation

CGHR.ORG

Source: Chaloupka, et al, 2010, WHO, 2010

Obstacles raised to higher tobacco taxes

Taxes hurt the poor: p
Poor are more price responsive and health gains are progressive Consumption falls and revenues rise despite smuggling Crack down on criminal activity not lower tax rates small manufacturing base in most countries, and small (and shrinking farmers) Money not spent on tobacco is spent on other goods/services generating other jobs ti th j b revenue rises even with large one-time increases, and from high t hi h l hi h to higher levels l

Smuggling: gg g

Job loss

Revenue loss:

CGHR.ORG

R isk of dyin at ages 35-69 yea rs (% ) ng

Risk of dying from all causes (white bar) or smoking (shaded bar): 60 men, Canada ages 35-69 years
50 40 30 20 10 0
96 86 96 86 91 01 91 19 19 19 19 19 20 19

39

36

33

29

28

25

23 8

19

20 6
01

24 7
86

20 6
91

17

18 5
96 19

14

16 4
01 20

11

10

20

Low
CGHR.ORG

Middle Neighborhood income quintile

19

19

High
Source: Singhal, Jha et al, in press

Who Pays & Who Benefits

Impact of Federal Tax Increase, U.S., 2009 Red=share of i R d h f income, Bl Blue=share of reduced d th ) h f d d deaths)
70% 60% 50% 40% 30% 20% 12% 10% 0% <povertyline
CGHR.ORG

67%

46%

24%

>2*povertyline

Source: Chaloupka et al., in progress; assumes higher income smokers smoke more expensive brands

Tax and health burdens by SES: Methods

Collected data on price elasticity, cigarette prevalence and consumption, adult and youth population, and cigarette price and taxation; data came mainly from GATS country reports Separate models for local elasticities (country-specific) and universal elasticities (averaged at -0.4; ratio of universal elasticities across wealth groups matched th t of l l ti iti lth t h d that f local l elasticities) Used a tiered price and tax structure (higher prices and tax rates in wealthier groups) when data were available Assumed smoking death rate of 1/3 for youth, (1/3)*(.6875)=0.23 for adults Simulated effect of 25% increase in cigarette retail price on total taxes paid and number of smoking deaths Results stratified by wealth group

CGHR.ORG

Philippines - LOCAL elasticities pp

Distribution of marginal taxes and health benefits by SES group

Low SES group:

Pays 7.0% of increased taxes Receives 33 6% of health b R i 33.6% f h lth benefits fit Health/tax ratio: 4.80
CGHR.ORG

India - LOCAL elasticities

Distribution of marginal taxes and health benefits by SES group

Low SES group:

Pays 18.4% of increased taxes Receives 40 6% of health b R i 40.6% f h lth benefits fit Health/tax ratio: 2.21
CGHR.ORG

Thailand - LOCAL elasticities

Distribution of marginal taxes and health benefits by SES group

Low SES group:

Pays 7.4% of increased taxes y Receives 58.1% of health benefits Health/tax ratio: 7.85
CGHR.ORG

Vietnam - LOCAL elasticities

Distribution of marginal taxes and health benefits by SES group

Low SES group:

Pays 38.8% of increased taxes Receives 58 8% of health b R i 58.8% f h lth benefits fit Health/tax ratio: 1.52
CGHR.ORG

Turkey - LOCAL elasticities y

Distribution of marginal taxes and health benefits by SES group

Low SES group:

Pays 7.1% of increased taxes Receives 16 7% of health benefits 16.7% Health/tax ratio: 2.35
CGHR.ORG

US - LOCAL elasticities
Distribution of marginal taxes and health benefits by SES group

Low SES group:

Pays 12.4% of increased taxes Receives 34 0% of health b R i 34.0% f h lth benefits fit Health/tax ratio: 2.74
CGHR.ORG

Tobacco taxes and revenues

Inflation Adj t d Ci I fl ti Adjusted Cigarette Taxes and tt T d Cigarette Tax Revenues, Indonesia, 1979-2001

CGHR.ORG

Source: Djutaharta, et al., 2005

Canada Sharply Reduced Taxes in 1993 T i

12 10 8 6 4 2 1989 1990 1991 1992 1993 1994 1995 -1 Real price per pack (US p SD) 80 70 60 50 40 30 20 10 0 Annu cigarette consumption per ual e

Real Price
CGHR.ORG

Consumption

Sources: Joossens, et al., 2000; Merriman, et al., 2000

Source: World Bank, 2003

capita (in packs)

Tax reduced in an attempt to counter smuggling li I V

100 90

Sweden Reduced Cigarette Taxes by Ta es b 17% in 1998

Cigarette Tax Revenue and Consumption in Sweden, 1970-1998
7000 6000 M illio S E n K 5000 4000 3000 2000 1000
17 90 17 93 17 96 17 99 18 92 18 95 18 98 19 91 19 94 19 97

80 70 60 50 40 30 20 10 0 p c /c p a k c ita a

TaxesMillion SKE
CGHR.ORG

cigarette/pack

Source: World Bank, 2003

What would BAT say? y

No company can increase its prices significantly without taking the risk of promoting illicit trade and evasion. A heavy tax burden could have effects that are opposite to those expected, difficult to revert and with no doubt, pp p , , very harmful for the country (Page 39 of WITCO annual report) Select Committee on Health of the House of Commons, London on 16 February 2000, found: Support for criminal activity is endemic among BAT senior managers BAT has provided support to narcotics traffickers and other organised crime ( i (another study f th t d found a li k t t d link to terrorists) i t ) BAT has obstructed investigations into its involvement in tax evasion and smuggling BAT fixes prices and discusses smuggling activities with competitor companies A criminal investigation should start in the United Kingdom

http://www.guardian.co.uk/bat
CGHR.ORG

 A 10% increase in law enforcement assuming no change in income, will

Combating illicit trade g

Turkey: new best practices Lessons from Spain which reduced share of smuggled g cigarettes from estimated 15% in 1995 to 5% in 1999
Focus on large scale, container smuggling Strengthened tax administration with new technology and better enforcement C Collaboration with France, Andorra, Ireland, UK and the EU AntiFraud Office Did NOT focus on individual tax avoidance, street sellers

Decrease smuggling activities by 5.4% Reduce global consumption by 2.3% Increase governments tax revenues by 7.8% despite 4% total tax revenue lost due to smuggling

Lessons from California: high tech approaches

CGHR.ORG

Source: Yarely & Sayings 2006, Yurekil, 2010

Acting to raise taxes

Epidemiological estimates on hazards of tobacco and benefits of cessation Technical analyses on taxes and structure of taxes D Document and report th t strategy of th t d t the tax t t f the tobacco industry Engage at technical level- Health and Finance Ministries Policy and technical briefs, working groups y , gg p Engage at political level- Prime Ministers, Finance Ministers and politicians The 1 pager CGHR.ORG Civil society- eg Mexico protests

Mexico: 7 peso (25%) tax rise, 2010 p ( ) ,

GOAL: 10 peso hike Good epidemiologic analyses
Mexico: ~11 M smokers so 4-6 M will die from smoking unless they quit Price elasticities and poverty analyses Immediate follow up numbers to show increasing revenue revenue, decreasing consumption, no major smuggling

International seminar with MoF: Political visiblity

Senator Saro Organized NGO protests on steps of MoF O i d t t t fM F Slogan: 10 pesos for 1 million lives saved

Linked to financing development:

CGHR.ORG

soft earmarking- more money focused on poverty reduction

Take tobacco seriously: big cause of death and big cause of poverty Focus on adults stopping as well as kids Triple excise tax on tobacco: would sharply raise retail price, get at least 30% of current smokers to quit (and prevent kids from starting), and raise more tax revenue Know and refute objections to higher tax: (i) harms the th poor- h lth gains are pro-poor and tax b d health i d t burden on the poor might not increase; (ii) smuggling-

4 Actions to save at least 100 M lives A i l li

CONCLUSIONS:

CGHR.ORG

counter with labels with tax stamp smart labels stamp, labels, and coordination Source: Jha, et al EPW