Innovative financing for health: tobacco taxes
Country-level initiative in low- and middle-income countries
Using tobacco taxes for sustainable financing at national levels to reduce inequities in accessing health care and strengthen health systems.
Low- and middle-income countries (LMICs) can increase their own tobacco taxes and use them to finance their own health systems. LMICs can raise funds internally in a sustainable manner by increasing tobacco taxes and allocating increased tax revenues to strengthen their health systems.
Because of the generally low level of taxes in low-income countries, there is substantial room for tobacco tax increases. Increased tobacco taxes would provide the added benefit of decreasing tobacco use, particularly among young people and the poor, leading to improved population health. A recent WHO estimate showed that an increase of 50% in cigarette excise taxes in 22 of the 49 low-income countries would generate a total of USD1.42 billion. In countries like Congo, Laos or Viet Nam, the extra revenue would be equivalent to an increase in current government expenditure by more than 25% (World Health Report 2010). Tobacco taxes are a pro-poor policy. A number of studies analysing national household surveys have shown that poor consumers are more sensitive to price/tax increases compared to higher income consumers. This means that a tax increase can be progressive because it can lead to a higher reduction in tobacco use among the poor leading to higher health benefits among poor populations.