The ultimate objective of taxes is to make the product so expensive that it becomes an incentive for smokers to reduce consumption or quit smoking, an addiction that generates high health, economic and social costs.
In 2021, more than 350,000 people died in the region from tobacco use and smoke exposure, and more than 40% of respiratory cancer cases in Latin America were attributed to smoking.
Medical costs associated with tobacco consumption can reach 1.5% of annual GDP, according to the report.
Taxes on cigarettes, cigars and roll-your-own tobacco in most countries in the region are below the threshold recommended by the World Health Organization (WHO) of 75% of the sales price.
“There is an urgent need to undertake a new wave of tobacco tax reforms in the Latin American and Caribbean region and thus strengthen the effectiveness of tobacco tax policies and administration,” since on average, those products “remain affordable.”
In many cases, taxation varies depending on the product and in the case of the newest ones, they are not even subject to taxes or when they are they are “too low to discourage young people” from consuming them, the authors maintain.
The collection of indirect taxes on tobacco is between 0.01% (in Barbados) and 2.58% (in Chile).
Excise taxes on tobacco generate, on average, 0.50% of total tax collection in Latin America and the Caribbean, which represents around a third of the average annual medical costs attributable to smoking.
For taxes to play their deterrent role, they must be “sufficiently high,” which will also limit the ability of tobacco companies to absorb the tax rather than pass it on to sales prices, the authors note.
