Tobacco taxes in Latin America

Is it possible to achieve progressive control of tobacco use, one of the leading causes of non-communicable diseases that account for nearly 70% of global deaths, and 77% of premature deaths in the Americas*? Can fiscal policies have a tangible effect in reducing tobacco consumption that reaches 25% in some Latin American countries*?

Today, the South American Network on Applied Economics/Red Sur launched a new research, Tobacco taxes in Latin America, as part of a global project focused on studying the different options for tax policies as an effective tool to reduce the levels of tobacco consumption. The University of Illinois at Chicago’s (UIC) Institute for Health Research and Policy facilitates this global effort on the economics of tobacco through a web-based platform called “Tobacconomics.”

Red Sur will lead Latin-American studies on tobacco taxes, focusing on Argentina, Brazil, Ecuador, Mexico and Peru, where 263.000 people die annually due to tobacco related causes.**

In Latin America, there have been important tax reforms with the goal of reducing tobacco consumption. However, these reforms have often fallen short of the intended purposes.  New and additional increases in tobacco taxes have been blocked by concerns about potential negative economic impacts from tobacco tax increases, often fuelled by vested interests from the tobacco industry. 

Evidence from around the world shows that higher tobacco taxes and prices, along with other tobacco control policies, such as smoke free laws and selling bans reduce the toll of tobacco related deaths and bring in new revenues, which can finance health and development efforts. 

This initiative aims to accelerate these processes and will focus on:

• Alternative strategies for reducing affordability of tobacco products, such as indexation of taxes to offset inflation and rising incomes, with incremental increases.
• Social and economic costs of tobacco use, including healthcare expenditures, lost productivity.
• Supply side effects of increased tobacco taxes, including labor, farming, and/or manufacturing impacts.
• Impacts of increased tobacco taxes on inequality, in particular progressivity and poverty impacts of tobacco production and use.
• Use of tobacco taxation as an instrument to reduce tobacco consumption targeted to support achievement of the Sustainable Development Goals (SDGs).
• Tax administration and compliance aspects related to tobacco taxation including tax avoidance, evasion and illicit trade.