Revamping Tobacco Taxation Strategies for High-Burden Asian Countries

The People's Republic of China economy suffers from high smoking prevalence due to a lack of evidence-based tobacco tax policies. Photo credit: ADB.

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Tax reforms aimed at a 10% reduction in smoking prevalence could reduce the population of smokers by 38.7 million and prevent 11.6 million premature deaths.


Tobacco use continues to pose a significant global health challenge, with smokers accounting for 75% of the 1.3 billion adult tobacco users worldwide. Globally, tobacco-related diseases account for 12% of adult deaths, resulting in more than 8.2 million fatalities each year. These adverse health effects are disproportionately felt in low- and middle-income countries (LMICs), where the majority of tobacco users reside and where the majority of these premature deaths occur. Five LMICs—India, Philippines, People’s Republic of China (PRC), Thailand, and Viet Nam—collectively account for 41% or 401 million of the world's smokers. Despite the devastating impact of the COVID-19 pandemic, annual tobacco-related deaths continue to surpass the pandemic's cumulative toll in many of these countries.

A study conducted by the Asian Development Bank (ADB) in 2012 published a set of tobacco excise tax recommendations and their expected impact on health and government revenue in the aforementioned countries. The study estimated that a 50% increase in cigarette prices through tax hikes would reduce the number of smokers in the five countries by 67 million and generate an additional $25 billion in annual tax revenue. The required tax increases were estimated to range from 172% to 222% across the five countries. The report also predicted that such tax hike would avert 27 million deaths in these countries.

A decade later, ADB decided to revisit the study to assess the actions taken, progress made, and lessons learned. This was done to determine which measures could further reduce smoking prevalence while simultaneously supporting domestic revenue mobilization.

This article highlights the findings of this follow-up study.

Progress in Tobacco Taxation Since the 2012 Study

The ADB governance brief Excise Tax Policy and Cigarette Use in High-Burden Asian Countries reveals a notable lack of progress in tobacco taxation over the past decade in India, PRC, Thailand, and Viet Nam. Only the Philippines successfully implemented an evidence-based tobacco tax policy, thanks to its multi-sectoral coalition that framed the excise tax as a public health measure contributing to Universal Health Care. This initiative resulted in a 19% reduction in smoking prevalence and a 138% increase in real excise tax revenue. However, the new study emphasizes that sustaining this success is crucial. Cigarettes in the Philippines remain cheaper than in countries like India or Thailand, and inflation could be undermining the effectiveness of the specific tax.

Considering the lack of a robust tobacco control effort in the PRC, it is unsurprising that it has the highest smoking prevalence among the five countries. While the country did implement some tax increases, leading to a 105% increase in real excise tax revenue over the past 10 years, rising incomes offset the impact of these modest hikes on cigarette affordability, resulting in persistently high smoking rates. The PRC urgently requires comprehensive tax reforms to effectively curb tobacco use.

India legislated regular cigarette tax hikes that initially led to a decline in cigarette sales and a 35% growth in real excise tax revenue over a 10-year period. However, since the introduction of the goods and services tax in 2017, cigarette affordability has increased again, encouraging higher consumption. The country needs to revisit its tax structure, reduce overreliance on ad valorem taxes, and further increase the cigarette tax rate. Additionally, India should reconsider its excise tax policy regarding bidis and smokeless tobacco, which have a much larger user base compared to cigarettes than in other countries, to reduce overall tobacco use.

Thailand has made strides in reducing smoking prevalence but faces challenges, including a monopolistic market, industry tax avoidance, and a tiered tax structure. As a result, its real cigarette excise revenue grew by only 5% from 2010 to 2020. Adopting more aggressive tax policies, eliminating the tiered structure, and addressing tax avoidance are crucial for achieving sustained reductions in smoking rates while generating tax revenue.

Viet Nam has seen minimal, if any, progress in tobacco tax policies over the last 10 years, resulting in stagnant smoking rates and an 8% decline in real excise tax revenues. Cigarettes were 42% more affordable in 2020 compared with 2010. Fundamental reforms, including a shift from purely ad valorem to a specific or mixed tax regime, are needed to effectively combat high smoking prevalence.

Way Forward

The detrimental impact of smoking on public health and the economy is preventable. Extensive research has demonstrated that higher tobacco taxes are among the most powerful and cost-efficient tools to reduce tobacco consumption. Globally increasing excise taxes $1 per pack of cigarettes would result in a reduction of the smoking population by 66 million and prevent 15 million smoking-related deaths. Furthermore, this tax increase would generate additional tax revenue of at least $178–219 billion, with LMICs potentially generating up to $133–167 billion. This constitutes approximately 2% of LMICs' GDP.

Tailor-made, country-specific analyses of cigarette taxation identify the necessary tax reforms to achieve a 10% or a 5% decline in smoking prevalence in each of the aforementioned countries.

For example, the 2023 ADB governance brief indicates that a tax increase of ₱65 per pack ($1.32) in the Philippines is predicted to reduce its smoking prevalence by 10%, generating additional tax revenue of ₱159 ($3.23) billion and averting more than 328,000 premature deaths.

Similarly, to achieve a 10% reduction in smoking prevalence, the PRC would need to increase the excise tax by CNY3.7 per pack ($0.57) and rely more on the specific component of its excise tax. This could generate additional tax revenue of CNY384 ($59.54) billion, averting 9.4 million premature deaths.

In India, an increase of ₹93 per pack ($1.26) in excise-specific duties is necessary to achieve a 10% reduction in smoking prevalence. This would generate additional tax revenue of ₹191 ($2.58) billion, averting 1.1 million premature deaths. A potential area of focus for India in the future is on implementing appropriate complementary policies for the segment of bidi smokers and smokeless tobacco (SLT) users, as the steep increases in cigarette prices may motivate smokers to explore either bidi smoking or SLT products.

In Thailand, an increase in the excise tax by B50 per pack ($1.66) is needed to achieve a 10% reduction in prevalence. This would generate additional tax revenue of B48 ($1.50) billion, averting 300,000 premature deaths.

In Viet Nam, an increase in the excise tax by D5,500 per pack ($0.24) could result in a 10% decline in prevalence, D14,294 ($0.62) billion in additional tax revenue, and the averting of 480,000 premature deaths.

The study shows that if these five countries were to implement tax reforms aimed at a 10% reduction in smoking prevalence, they could reduce the population of smokers by 38.7 million and prevent 11.6 million premature deaths. This would also generate $67.5 billion of additional tax revenue, a 48% increase compared with the revenue collected in 2020. Even a less ambitious 5% reduction in smoking prevalence through taxation would yield remarkable outcomes, with 18.3 million fewer smokers, 5.5 million premature deaths averted, and a 21% increase in tax revenue.

The urgency to address tobacco use as a public health hazard and an economic burden cannot be overstated. There is a concerning lack of progress in tobacco taxation in India, PRC, Thailand, and Viet Nam over the past 10 years. Yet, there is also a vast potential for saving lives and raising domestic revenues by taking feasible actions similar to those already implemented by the Philippines.

Significant increases in excise taxes that lead to higher cigarette prices would not only improve public health but also benefit the overall economies of these countries while generating tax revenue. Evidence-based tobacco tax policies presented in this study, combined with other tobacco tax policies, can play an important role in post-pandemic national recovery, creating a healthier and more prosperous future.

Sandeep Bhattacharya
Senior Public Management Specialist (Tax), Public Sector Management and Governance Sector Office, Sectors Group, Asian Development Bank

Sandeep Bhattacharya has more than 28 years of experience in tax policy and administration, consulting, and academia. Prior to joining ADB, he taught classes in taxation, public economics, statistics, and econometrics, as well as supervised student research at Duke University. He has a PhD in Economics from Georgia State University and has degrees from Duke University (Master of Public Policy), Delhi School of Economics (MA in Economics), and St. Stephen's College, Delhi University (BA Honors in Economics).

Hana Ross

Hana Ross has more than 25 years of experience conducting studies on the economic impact of tobacco control interventions, including excise tax policies in Africa, Southeast Asia, and the European Union. She also addresses issues related to illicit trade in tobacco and alcohol, measuring tax avoidance/evasion and developing strategies to control illegal cigarette and alcohol markets. She earned her Ph.D. in Economics from the University of Illinois, Chicago.

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Rijo M. John

Rijo John provides technical consulting for esteemed organizations such as the World Bank, WHO, ADB, University of Illinois Chicago, and CTFK. He is also an adjunct professor at Rajagiri College of Social Sciences, Kochi. Formerly, he served as an Assistant Professor at IIT Jodhpur. He holds a Ph.D. in Development Studies from IGIDR, Mumbai, and completed a post-doctoral fellowship at the University of California, San Francisco. His research focuses on the regulation of tobacco, alcohol, SSBs, and HFSS.

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The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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