Publication: Economics of Tobacco Toolkit, Tool 4 : Design and Administer Tobacco Taxes

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Yurekli, Ayda
The purpose of this tool is to help the reader understand the structure, design, and administration of tobacco taxes. There is no doubt about the adverse health impacts of tobacco use. In both developed and developing countries, the Ministries of health, tobacco interest groups, academia, and advocates against tobacco strongly believe that tobacco consumption should be reduced, and that tobacco taxes are the single most cost-effective policy tool to achieve this goal. This tool discusses some of the issues surrounding tobacco taxes from the perspectives of consumers, public health advocates, politicians, and government administrators. Guidance is provided in how to satisfy the goals of these players without compromising their interests. This tool is intended primarily for public health advocates, policy makers, tax administration staff, and government officials. Public health advocates will gain information on the various types of tobacco taxes and which type can best reduce cigarette consumption. The tool also discusses whether and how increased tobacco taxes create a financial burden on consumers, especially the poor. Since tobacco taxes are often justified from the public health perspective, this tool includes another point of view-that of the policy maker and the tax administrator. Designing and administering tobacco taxes is a process unique to every government. There are too many variables-from tobacco and tobacco product usage to the objective and purpose of taxation to the viable and most effective method of imposing and administering a tax-to allow for a general rule of thumb regarding tobacco excise taxes. Therefore, this tool cannot present universally applicable methods to apply, mathematical models or formulas to fulfill, or step-by-step instructions to follow. An excise tax is a tax on selected goods produced for sale within a country, or imported and sold in that country. The tax is usually collected from the producer/manufacturer/wholesaler or at the point of final sale to the consumer. An excise tax can be imposed on products and services if they have one or more of the characteristics. There are two general types of sales taxes: single-stage and multistage. Single stage sales taxes apply only at one stage of the production/distribution chain. Multi-stage sales taxes apply at several stages of the production/distribution chain for a product or service. The value-added tax (VAT) is a general indirect tax on consumption.
Yurekli, Ayda. 2013. Economics of Tobacco Toolkit, Tool 4 : Design and Administer Tobacco Taxes. © World Bank, Washington, DC. License: CC BY 3.0 IGO.
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