Is Spain lagging behind, and would the new EU Tobacco Tax Directive help?
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University of Cape Town, South Africa
Publication date: 2023-04-25
Corresponding author
Hana Ross   

University of Cape Town, South Africa
Tob. Prev. Cessation 2023;9(Supplement):A5
The last time Spain increased its cigarette excise tax was in 2016 when it approved a very small 2.5% excise tax increase. Since then, there have been no further tax increases. In addition, the tax system allows for a significant tax gap between roll-your-own (RYO) cigarettes and manufactured cigarettes, with RYO enjoying a tax rate more than 50% lower. The objective of the study is to examine the implication for current excise tax policy in Spain on public health and excise tax revenue and propose a policy solution that would not only improve public health, but also secure higher tax revenue for the government of Spain.

Material and Methods:
Using an empirically validated tobacco tax model, I examine the current state of tax limbo vis-a-vis its impact on the market for manufactured and RYO cigarettes in term of the volume, value as well as the public health impact of the static tax policy. Next, the model simulates the impact of possible tax increases (motivated by the new EU Tobacco Tax Directive) over the period of 5 years and demonstrates their impact on market volumes, smoking prevalence, premature smoking-related deaths averted, tax revenue. and industry profits. The tax simulation takes advantage of existing studies on price and income elasticities of demand in Spain and accounts for substitution between RYO and manufactured cigarettes.

The tax model clearly demonstrates that the current excise tax policy is detrimental to both public health and the overall economy. Increasing the tax rate and eliminating the tax advantage of RYO cigarettes, a likely feature in the new EU Tobacco Tax Directive, will significantly reduce the stubbornly high smoking prevalence in Spain, prevent thousands of premature deaths, and increase tax revenue.

Supporting the release of the European Commission proposal to update the EU Tobacco Tax Directive can provide a vital impetus for countries like Spain to achieving the objectives of the EU Cancer Plan that calls for a 20% tobacco use prevalence in the EU. This goal is feasible even in the presence of cross-border shopping and tax evasion.

The authors have no conflicts of interest to declare.
This research has been supported by a grant from the University of Illinois at Chicago, Grant-Fund: G1048_550163
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