TUGAS MATA KULIAH

PENULISAN DAN KOMUNIKASI AKADEMIK

Nama : Irfana Fadya
NPM : 2306187850
1. Topik Penelitian
Dampak Kebijakan Cukai Rokok pada Bidang Kesehatan

2. 5 paper dari jurnal yang bereputasi sesuai dengan topik yang dipilih
a. The introduction of tobacco excise taxation in the Gulf Cooperation Council Countries: a step in the right direction of advancing public
health
b. The health, financial and distributional consequences of increases in the tobacco excise tax among smokers in Lebanon
c. The health and economic burden of smoking in 12 Latin American countries and the potential effect of increasing tobacco taxes: an
economic modelling study
d. Extended cost–benefit analysis of tobacco taxation in Brazil
e. The Controversy of Trade in Tobacco and Protection of Public Health, A Study of Tobacco Control Measures and Impacts on Trademark
Practice: The Stricter, The Better?

3. Analisa 3 dari 5 paper diatas dengan mencari

Metode Penelitian
No. Informasi Paper Motivasi Tujuan Penelitian (Model dan Variabel yang Hasil Temuan
digunakan)
1 a. Judul: e. Motivasi Paper: f. Tujuan g. Model yang digunakan: i. Hasil Temuan:
The introduction of Di negara-negara Gulf Mengetahui Penelitian fokus pada simulasi • Simulasi reformasi pajak rokok
tobacco excise taxation in Cooperation Council (GCC), total reformasi pajak cukai reformasi kebijakan pajak selama menunjukkan bahwa reformasi
the Gulf Cooperation biaya merokok dan perokok pasif dapat membantu tiga tahun. Untuk memperkirakan kebijakan pajak yang
Council Countries: a step diperkirakan berjumlah 1,04% meningkatkan hasil dari usulan reformasi direkomendasikan akan
in the right direction of dari total Produk Domestik Bruto kesehatan kebijakan pajak terhadap pasar menghasilkan kenaikan harga
advancing public health (PDB) pada tahun 2017. masyarakat dan rokok dan pendapatan pajak, rokok lebih dari 50%, penurunan

No. Informasi Paper
b. Nama Penulis:
Sofia Delipalla, Konstantina
Koronaiou, Jawad A. Al‑Lawati,
Mohamed Sayed, Ali Alwadey,
jlal F. Al Alawi, Patrick M.
Bernett , Gulcin Gumus,
Sharmila Vishwasrao
c. Nama Jurnal:
BMC Public Health
d. Nomor/Volume/Tahun:
Volume 22, 2022
Metode Penelitian
Motivasi Tujuan Penelitian (Model dan Variabel yang
digunakan)
Persentase biaya langsung mengurangi peneliti menggunakan model WHO
(belanja kesehatan) tertinggi pengeluaran The Tobacco Tax Simmulation
adalah belanja kesehatan kesehatan terkait (TaXSiM), yang memerlukan data
pemerintah, dan proporsi biaya tembakau, sekaligus rinci mengenai penjualan, harga
tidak langsung tertinggi menghasilkan eceran dan harga produsen serta
(kehilangan produktivitas akibat pendapatan pajak semua jenis pajak (bea masuk,
kesakitan dan kematian) yang besar. cukai, dan PPN) per tahun, merek,
disebabkan oleh kebiasaan serta populasi negara dan
merokok yang dilakukan oleh prevalensi merokok orang dewasa.
laki-laki dan masyarakat paruh Model ini memprediksi dampak
baya. Penyebab utama adalah perubahan struktur pajak dan/atau
penyakit kardiovaskular sebagai tarif pajak terhadap harga eceran,
biaya mortalitas dan diabetes konsumsi, cukai dan total
melitus tipe 2 sebagai biaya penerimaan pajak yang dihasilkan
kesakitan. oleh setiap merek dan segmen
pasar, serta prevalensi merokok.
h. Variabel yang digunakan:
Data rinci yang diperlukan seperti
penjualan, harga eceran dan harga
produsen serta semua jenis pajak
(bea masuk, cukai, dan PPN) per
tahun, merek, serta populasi negara
dan prevalensi merokok orang
dewasa.
Estimasi didasarkan pada data
Euromonitor untuk Arab Saudi pada
Hasil Temuan
penjualan rokok sebesar 16%,
dan peningkatan total
penerimaan pajak rokok sebesar
hampir 50%. Sebagian besar
angka kematian terkait rokok
dapat dicegah.
• Hasil pada poin 1, memberikan
wawasan yang relevan dengan
seluruh wilayah GGC. Namun
efektivitas reformasi pajak rokok
tersebut memerlukan
administrasi perpajakan dan bea
cukai yang kuat, termasuk
pembentukan database yang
baik untuk memantau dan
meningkatkan kesehatan
masyarakat.
 Metode Penelitian
No. Informasi Paper Motivasi Tujuan Penelitian (Model dan Variabel yang Hasil Temuan
digunakan)
bulan Desember 2017 dan sumber-
sumber pemerintah.
Pajak Pertambahan Nilai PPN, mata
uang SAR Arab Saudi dalam Rial.
2 a. Judul: The health, e. Motivasi Paper: f. Tujuan g. Model yang digunakan: i. Hasil Temuan:
financial and Tembakau merupakan Menguji Menggunakan extended cost- Permintaan tembakau bersifat
distributional faktor risiko yang signifikan konsekuensi effectiveness analysis (ECEA) inelastis terhadap harga dengan
consequences of increases terhadap penyakit tidak distribusi dan (Verguet et al., 2015a, 2015b, elastisitas berkisar antara 0,32 untuk
in the tobacco excise tax menular termasuk penyakit manfaat 2015c). kuintil termiskin, hingga 0,22 untuk
among smokers in kardiovaskular, kanker, dan keuangan dan kuintil terkaya. Kenaikan pajak
Lebanon stroke. Organisasi kesehatan rumah h. Variabel yang digunakan: tembakau diperkirakan dapat
Kesehatan Dunia (WHO) tangga (per Menggunakan extended cost- mencegah 65.000 (95% CI: 37.000-
b. Nama Penulis: Nisreen memperkirakan beban kelompok sosial- effectiveness analysis (ECEA) 93.000) kematian dini, tambahan
Salti a, Elizabeth Brouwer, ekonomi tahunan akibat ekonomi) dari (Verguet et al., 2015a, 2015b, pendapatan pajak sebesar $300 juta,
Stephane Verguet penyakit akibat tembakau kenaikan pajak 2015c), yang terdiri dari enam aspek pengurangan pengeluaran layanan
mencapai lebih dari $500 cukai tembakau pengukuran: kesehatan $23 juta ($13-33 juta).
c. Nama Jurnal: Social miliar, yang melebihi total di Lebanon, • Elastisitas Harga Penghematan ini akan dikaitkan
Science & Medicine pengeluaran kesehatan menggunakan berdasarkan kelompok dengan 23.000 (13.000- 33.000) kasus
tahunan di negara-negara extended cost- umur kemiskinan yang dapat dicegah (63%
d. Nomor/Volume/Tahun: berpendapatan rendah. effectiveness • Out-of-pocket tobacco pada kuintil termiskin).
Volume 170, 2016 Tanpa intervensi yang analysis (ECEA). expenditures dan
signifikan, jumlah kematian perubahan pendapatan
akibat tembakau di negara- pemerintah
negara berpendapatan • Terhindarinya kematian dini
rendah dan menengah • Health system and out-of-
diperkirakan akan mencapai pocket costs averted
7 juta kematian per tahun • Terhindarnya kasus-kasus
pada tahun 2030, dua kali kemiskinan

No. Informasi Paper
3 a. Judul:
The health and economic
burden of smoking in 12 Latin
American countries and the
potential effect of increasing
tobacco taxes: an economic
modelling study
b. Nama Penulis:
Andrés Pichon-Riviere, Andrea
Alcaraz, Alfredo Palacios,
Belén Rodríguez, Luz Myriam
Reynales-Shigematsu, Márcia
Pinto,Marianela Castillo-
Riquelme, Esperanza Peña
Torres, Diana Isabel Osorio,
Leandro Huayanay, Cesar Loza
Munarriz, Belén Sáenz de
Miera-Juárez,Verónica
Gallegos-Rivero, Catherine De
La Puente, María del Pilar
Navia-Bueno, Joaquín
Caporale, Javier Roberti,
Sacha Alexis Virgilio, Federico
Augustovski, Ariel Bardach
Metode Penelitian
Motivasi Tujuan Penelitian (Model dan Variabel yang Hasil Temuan
digunakan)
lipat dibandingkan tahun • Analisis Sensitivitas
2010 (NCD Alliance, 2011).
e. Motivasi Paper: f. Tujuan g. Model yang digunakan: i. Hasil Temuan:
Di seluruh dunia, merokok Memperkirakan • Diperkirakan bahwa kenaikan
menyebabkan 7 juta kematian beban kematian, harga rokok melalui pajak
Model diatas untuk menghitung
setiap tahunnya, dan jumlah ini kejadian sebesar 50% di 12 negara
efek dari kenaikan harga (karena
diperkirakan akan terus penyakit, Amerika Latin yang dianalisis
kenaikan tax) pada prevalensi
meningkat, terutama di negara- hilangnya dapat menghasilkan manfaat
merokok.
negara berpendapatan rendah kualitas hidup, kesehatan dan ekonomi yang
dan menengah. Di Amerika dan biaya besar dalam 10 tahun ke depan.
h. Variabel yang digunakan:
Latin, merokok merupakan pengobatan yang Di 12 negara ini, diperkirakan
PrevB : Baseline prevalensi merokok
faktor risiko utama kematian dan disebabkan oleh bahwa kenaikan harga ini akan
sebelum kenaikan harga
kecacatan, berkontribusi tembakau di 12 menyebabkan penurunan
ΔP : variasi harga sebagai proporsi
terhadap kemiskinan, dan negara Amerika 314.314 kematian.
terhadap harga dasar
memberikan beban ekonomi Latin, serta • Dalam jangka panjang, kenaikan
Ip : proporsi variasi konsumsi rokok
pada sistem kesehatan. perkiraan harga tembakau sebesar 50%
yang diperkirakan mempengaruhi
dampak dapat mencegah antara 7,6%
prevalensi merokok
kesehatan dan (Argentina) dan 32,4% (Bolivia)
Ed : Elastisitas harga permintaan
ekonomi dari dari seluruh kematian yang
rokok
kenaikan pajak disebabkan oleh merokok setiap
tembakau. tahunnya dan dapat
menghasilkan keuntungan
ekonomi yang setara dengan
0,09% dari produk domestik
bruto di Peru, hingga 0,31% dari
produk domestik bruto di
Uruguay. Di beberapa negara,
 Metode Penelitian
No. Informasi Paper Motivasi Tujuan Penelitian (Model dan Variabel yang Hasil Temuan
digunakan)
manfaat ekonomi ini dihasilkan
c. Nama Jurnal: The LANCET terutama dari penghematan
Global Health biaya layanan kesehatan
(misalnya di Bolivia, Kolombia,
d. Nomor/Volume/Tahun: dan Peru) dan di negara lain,
Volume 8, Issue 10, 2020 melalui peningkatan
pengumpulan pajak (misalnya di
Argentina, Honduras, dan
Meksiko).

DAFTAR PUSTAKA

Delipalla, S., Koronaiou, K., Al-Lawati, J. A., Sayed, M., Alwadey, A., AlAlawi, E. F., Almutawaa, K., Hussain, A. H. J., Al-Maidoor, W., & Al-Farsi, Y. M. (2022).
The introduction of tobacco excise taxation in the Gulf Cooperation Council Countries: a step in the right direction of advancing public health. BMC
Public Health, 22(1), 1–8. https://doi.org/10.1186/s12889-022-13190-0

Divino, J. A., Ehrl, P., Candido, O., & Valadao, M. A. P. (2022). Extended cost-benefit analysis of tobacco taxation in Brazil. Tobacco Control, 31, s74–s79.
https://doi.org/10.1136/tobaccocontrol-2021-056806

Salti, N., Brouwer, E., & Verguet, S. (2016). The health, financial and distributional consequences of increases in the tobacco excise tax among smokers in
Lebanon. Social Science and Medicine, 170, 161–169. https://doi.org/10.1016/j.socscimed.2016.10.020

Sunardiyah, F., Muhammad, A., Naini, I., Sunardiyah, F., Muhammad, A., & Naini, I. (2023). The Digital Socialization Effectiveness of “Destroy The Illegal
Cigarettes” at Customs and Excise Office in Surakarta. Jurnal Komunikasi Indonesia, 12(1). https://doi.org/10.7454/jkmi.v12i1.1060

Suwan-in, N. (2014). The Controversy of Trade in Tobacco and Protection ofPublic Health, A Study of Tobacco Control Measures andImpacts on Trademark
Practice: The Stricter, The Better? Indonesian Journal of International Law, 11(4). https://doi.org/10.17304/ijil.vol11.4.522
Delipalla et al. BMC Public Health (2022) 22:737
https://doi.org/10.1186/s12889-022-13190-0

RESEARCH Open Access

The introduction of tobacco excise taxation

in the Gulf Cooperation Council Countries:
a step in the right direction of advancing public
health
Sofia Delipalla1*†, Konstantina Koronaiou1†, Jawad A. Al‑Lawati2†, Mohamed Sayed3†, Ali Alwadey4†,
Ejlal F. AlAlawi5†, Kholoud Almutawaa6†, Amal H. J. Hussain7†, Wedad Al‑Maidoor8† and Yahya M. Al‑Farsi3,9†

Abstract
Background: The Gulf Cooperation Council (GCC) countries relied, until recently, solely on import duties for tobacco
products. The agreement for the introduction of an excise and value added tax (VAT) in 2016 and 2017, respectively, in
most GCC countries, was a major breakthrough for public health. There is, however, ample room for improvement.
Methods: The study examines the outcomes of tax reforms, for both public health and public finances, based on the
World Health Organization (WHO) recommendations and best practices worldwide. Tax simulations were performed
using the WHO TaXSiM model. The study is based on data from Saudi Arabia, the only GCC country for which suffi‑
cient data existed.
Results: We recommend a stepwise tax reform, which involves increasing the current ad valorem excise tax rate,
phasing out import duties keeping total tax share constant and introducing a minimum excise, and finally switching
to a revenue-neutral specific excise. Specific excises must be adjusted for inflation and income increases. If imple‑
mented, cigarette tax reform simulations show that the recommended reforms would lead to a higher than 50%
increase in cigarette prices, 16% reduction in cigarette sales and almost 50% increase in total cigarette tax revenue. A
significant number of cigarette-related deaths would be averted.
Conclusions: The recommended tax reforms are expected to lead to significant improvements in both public health
and tobacco tax revenues. Our results provide useful insights that are of relevance to the whole GGC region. The
effectiveness of the reforms, however, requires a strong tax and customs administration, including the establishment
of a good database to monitor and advance public health.
Keywords: Cigarette tax, excise tax reform, GCC countries, Saudi Arabia, public health policy

Background
Design and implementation of tobacco taxation is
the most efficient and cost-effective measure to con-
*Correspondence: sd@uom.edu.gr
†
trol tobacco consumption [1, 2]. When significant tax
Sofia Delipalla, Konstantina Koronaiou, Jawad A. Al-Lawati, Mohamed
Sayed, Ali Alwadey, Ejlal F. AlAlawi, Kholoud Almutawaa, Amal H. J. increases are designed and implemented based on the
Hussain, Wedad Al-Maidoor and Yahya M. Al-Farsi contributed equally to general directions and best practices presented in the
this work.
1
WHO Technical Manual on Tobacco Tax Policy and
University of Macedonia, Thessaloniki, Greece
Full list of author information is available at the end of the article Administration [3], they lead to price increases which

© The Author(s) 2022. Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which
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Delipalla et al. BMC Public Health (2022) 22:737
have a beneficial effect on consumers’ behaviour. Taxes,
as part of a comprehensive tobacco control strategy, bring
about price increases which reduce tobacco use and the
associated negative health effects it causes. Tobacco use
is a major risk factor for many noncommunicable dis-
eases (NCDs), which lead to a reduction in personal lev-
els of well-being as well as an increase in economic costs.
In the Gulf Cooperation Council (GCC) countries, total
cost of smoking and second-hand smoke is estimated to
amount to 1.04% of total Gross Domestic Product (GDP)
in 2017 [4]. The highest percentage of direct cost (health
expenditure) is government health spending, and the
highest proportion of indirect cost (productivity losses
due to morbidity and mortality) results from smoking by
men and middle-aged people. The main causes are car-
diovascular diseases, for mortality cost, and type 2 diabe-
tes mellitus, for morbidity cost. Excise taxes help improve
public health and reduce tobacco-related health expendi-
ture whilst, simultaneously, generating considerable tax
revenue [3].
Before the introduction of excises, the GCC countries
relied solely on import duties, putting both revenues and
public health at risk due to the pressure of an increas-
ing number of free trade agreements. An import duty
of a 100% of the cost, insurance and freight (CIF) value
applied on all tobacco products, together with a mini-
mum duty amount (whichever is highest). In 2016, the
minimum import duty was doubled. Kuwait was, and still
remains, the only GCC country which did not double the
minimum import duty on tobacco products [5].
In 2016, the GCC countries collectively agreed to
implement a harmonized excise tax at the rate of 100% of
(excise-exclusive) retail price on all tobacco products [6].
The excise was first introduced in Saudi Arabia in June
2017, followed by the UAE and Bahrain in October and
December 2017, respectively. In January 2019, the tax
Table 1 Relative Income Price (RIP) and Price Dispersion Index, 2020
Affordability Affordability Index
Trend growth rate in affordability
2008–2018
Cigarettes less affordable since 2008
Price Dispersion Price of cheapest brand, pack of 20, in local currency
and (USD)
Price of Marlboro (or other premium brand), pack of 20, 2.30 (6.12) 0.85 (2.78) 2.20 (5.72) 22.00 (6.04) 28.00 (7.47) 21.00 (5.72)
in local currency and (USD)
Price dispersion index
Source: WHO Report on the Global Tobacco Epidemic,2021, Web Annex Appendix VI (12). Corrections have been made regarding the price of the cheapest brand in SA
and the UAE, after communication with WHO EMRO. SA, Saudi Arabia; UAE, United Arab Emirates; Prices in Bahrain, Saudi Arabia and UAE include excise taxes
RIP is defined as the percentage of per capita GDP required to buy 2000 cigarettes of the most sold brand in a specific year (12). Price dispersion index is defined as the
price of the cheapest brand as a percentage of the price of the most expensive one
Page 2 of 8
was implemented in Qatar, and 5 months later in Oman.
Implementation of excise in Kuwait was deferred to the
2020–21 fiscal year. In 2017, GCC countries have also
agreed on imposing a value added tax (VAT) on all goods
and services [7]. Saudi Arabia and the UAE implemented
VAT in January 2018 and Bahrain in January 2019. There
are ongoing preparations for VAT implementation in
Qatar and Oman in 2021 [8, 9], while Kuwait has not as
yet set a date for VAT implementation.
As a consequence of the tax reform, retail volume sales
of cigarettes at the GCC level, whilst steadily increas-
ing until 2016, decreased sharply in 2017, according to
Euromonitor [10]. This is mainly due to a decrease in
retail volume in Saudi Arabia, as it represents 64% of the
GCC retail volume and was the first country to introduce
tobacco excises. The UAE market also contributed to this
reduction but to a lesser degree [10]. Oxford Econom-
ics estimated that cigarette tax revenue across Kuwait,
Oman, Saudi Arabia and United Arab Emirates increased
by 66.7% in 2017 relative to the previous year [11]. This
increase seems to be entirely due to the introduction of
excise taxation, since legal sales decreased.
In all GCC countries, cigarettes became less affordable
since 2008, with an increase in the Relative Income Price
(RIP) (a measure of affordability) in the range of 9.65%
in Kuwait to 15.38% in Saudi Arabia (Table 1). The price
dispersion index ranges from 20.45% in Oman to 54.76%
in the UAE (Table 1). This means that the price of the
most expensive brand is 1.83 (UAE) to 4.89 (Oman) times
higher than the price of the cheapest brand. As the index
increases, the gap between cheapest and most expensive
brands decreases and, thus, the opportunities to switch
to cheaper brands are fewer [12].
In 2018, the sum of excise and import duty as a per-
centage of final price (all taxes inclusive) of the most
sold brand was lower than 75%, which is recommended
Bahrain Kuwait Oman Qatar SA UAE
2.67% 1.27% 3.97% 1.15% 3.81% 1.79%
11.54% 9.65% 13.61% 14.24% 15.38% 13.06%
YES YES YES YES YES YES
0.80 (2.13) 0.30 (0.98) 0.45 (1.17) 9.00 (2.47) 14.00 (4.00) 11.50 (2.31)
34.78% 35.29% 20.45% 40.91% 50.00% 54.76%
Delipalla et al. BMC Public Health (2022) 22:737
by the World Health Organization (WHO) [3, 13]. Spe-
cifically, in Bahrain, Saudi Arabia and the UAE, which
implemented an excise tax in 2018, the share of total tax
in final price was 70, 68.09 and 73.54%, respectively. For
the remaining countries, where only import duties were
implemented, the duty share was extremely low: 21.2% in
Kuwait, 25% in Oman and 40% in Qatar. Low tax shares
have hardly any effect on consumption and do not exploit
the full potential for revenue raising.
The GCC agreement for the introduction of an excise
tax and VAT in 2016 and 2017, respectively, was a step in
the right direction. Opportunities for improvement, how-
ever, still exist. Our aim here is to examine a three-step
cigarette tax reform, based on the WHO recommenda-
tions as well as best practices followed by countries that
adopted successful tobacco tax policies [13, 14], and esti-
mate its impact on consumption, prevalence, tobacco-
related deaths and tax revenue.
Tobacco tax structure and rates in Saudi Arabia
In 2016, when only import duty applied (100% of CIF
value), the estimated (sales-weighted) average tax-
inclusive retail sales price (TIRSP) of a pack of 20 was
Saudi Rials (SAR) 12.60 (Table 2). Import duty consti-
tuted 40% of the average TIRSP. The amount of import
duty remained the same in all examined years as the
calculation base is the CIF value, and this was assumed
unchanged.
In 2017, excise was introduced and the estimated
average TIRSP increased to SAR 25.60. The excise tax
was 50% of the average TIRSP and share of import duty
decreased to 20%. Thus, total tax increased to 70% of the
average TIRSP. Finally, in 2018, VAT was implemented,
increasing the estimated average TIRSP to SAR 26 and
total tax (including VAT) to 71.5% of the average TIRSP.
Table 2 Estimated cigarette market indicators (averages), in
local currency, 2016–2018, Saudi Arabia
Cigarette market indicators (Averages) 2016
Final price 12.6
Import duty (SAR) 5.0
Excise tax (SAR) 0.0
VAT (SAR) 0.0
Import duty as % of final price 39.7
Excise tax as % of final price 0.0
VAT % of final price 0.0
Total tax excl. VAT as % of final price 39.7
All tax as % of final price 39.7
Estimations based on data from Euromonitor International (2018) and
government sources. VAT: value added tax; SAR: Saudi Arabia currency in Rials (1
SAR ~ US $0.27)
Page 3 of 8
There was an upward trend on both total and legal
sales until 2016 [10]. In 2017, both total and legal sales
decreased by 19.5 and 21%, respectively. The difference
between total and legal sales is the illegal as well as free
trade zone (FTZ) sales, and they were estimated to be 5
to 7% of total sales [10]. Oxford Economics, compared to
Euromonitor, underestimates the sum of illicit and FTZ
sales for the years before the introduction of the excise.
In the second quarter of 2018, however, they report a
rapid increase of illicit and FTZ sales, reaching 10.7% of
total sales. Regarding cigarette data, let us keep in mind
that the main Euromonitor source is the tobacco industry
itself and that the Oxford Economics report was funded
by the tobacco industry [11].
Methods
We considered a three-year reform, starting with a
straightforward scenario for immediate action, and
then continued with a mid-term scenario that possibly
involves lengthy procedures such as amendments in the
GCC Treaties [6, 7]. Keeping in mind that all tobacco
products are harmful and should be taxed comparably,
we focus on reforms on the rate and structure of the ciga-
rette excise, since data did not exist for other tobacco
products. Not much is lost, however, as cigarettes are the
most common tobacco product used in GCC countries,
although waterpipe tobacco is also used [15, 16].
We analyze the following tax reforms for immediate
to medium term action. In the first year, increase the
tax rate (excise plus import duty) to be at least 75% of
final retail price (all taxes-inclusive). In the second year,
gradually replace import duties, increasing the excise tax
rate to compensate, and introduce a minimum excise tax
(MET). As the global trend is to reduce trade barriers, it
is best to replace import duties with domestic taxes to
compensate for revenues lost. In this case, as minimum
import duties are not in place anymore, a MET per 1000
cigarettes or pack of 20 should be introduced. The MET
guarantees a significant increase in price, especially in the
lowest price segment, and hence in health benefits. In the
2017 2018 third year, the reform would be completed by a gradual
25.6 26.0
switch to specific excise keeping tax revenue constant.
5.0 5.0
An ad valorem component, of course, will still apply
12.8 12.4
through VAT.
0.0 1.2
According to global evidence [13], the less preferable
19.5 19.2
tax type, from a public health perspective, is the ad valo-
50.0 47.7
rem tax. It is not only more likely to lead to lower average
0.0 4.6
prices but also, by increasing the gap between lower- and
69.5 66.9
higher-priced brands, encourages substitution towards
cheaper brands. In terms of administration, since we
69.5 71.5
need to know both the volume and value of taxed prod-
ucts, ad valorem taxation provides incentives for prod-
uct undervaluation to reduce tax liability. As a result, tax
Delipalla et al. BMC Public Health (2022) 22:737
revenue is less stable and more difficult to forecast. Given
these issues, the WHO recommends a specific excise tax
or a mixed excise with a minimum excise tax (MET). If
the real value of specific excises is likely to erode over
time, countries must adjust it for price inflation or
income increases. Regarding the base for the ad valorem
component, retail price is preferable than producer (or
import) price, since it is easier to observe and less likely
to be manipulated. Finally, for significant price increases,
the sum of excise and import duty as a percentage of final
price (all taxes inclusive) of the most sold brand is recom-
mended to be higher than 75% [3]. Countries that follow
these best practices have the highest prices and hence the
highest beneficial impact on consumer behaviour [13].
To test these tax reforms, we performed simulations for
Saudi Arabia. All tobacco products are imported since
tobacco cultivation and production is banned locally [17].
Cigarette market is characterized by the dominance of
premium brands and Marlboro is the most popular brand
of the category as well as of the market as a whole [10].
To estimate the outcomes of the suggested tax pol-
icy reforms on cigarette market and tax revenues, we
used the WHO TaXSiM model, which requires detailed
data on sales, retail and producer price and all types of
taxes (import duties, excises and VAT) per brand, as
well as country population and adult smoking preva-
lence [18]. The model predicts the impact of changes
in the tax structure and/or tax rates on the retail price,
consumption, excise and total tax revenues generated
by each brand and market segment, as well as smoking
prevalence. The more detailed information available, the
more accurate the predictions. In most cases, informa-
tion regarding consumer and producer response to tax
increases is not available, and certain assumptions have
to be made.
The GCC countries only recently started to collect
price data by cigarette brands. Sales by brand, however,
are more difficult to find. Hence, prices and sales for
most of the cigarette brands (covering just above 90%
of the market) were provided by Euromonitor [10]. Tax
information was provided by government. Data on popu-
lation are available from Saudi Arabia’s governmental sta-
tistical office [19]. In 2018, cigarette smoking prevalence
was reported to be 32.5% in males and 3.9% in females,
based on a latest study [20].
There are no studies estimating behaviour of either
demand or supply side in the GCC tobacco market.
Thus, we used demand elasticity values consistent with
the global evidence that, in high income countries, the
price elasticity of demand is on average − 0.4, ranging
from − 0.2 to − 0.6 [1, 2]. In the Saudi Arabia cigarette
market, the market share of premium, medium-priced
and economy brands was 62, 21 and 17%, respectively, in
Page 4 of 8
2017. The market is dominated by the premium brand so
we assumed a less elastic demand than the global aver-
age (− 0.3). We assume demand for premium (economy)
brands is less (more) sensitive to price changes. We made
conservative assumptions regarding cigarette demand
elasticity for three price segments, to estimate a lower
bound in consumption change. However, we also per-
formed a sensitivity analysis assuming higher elastici-
ties per price segment. Distribution margins and CIF are
assumed to have remained constant; any changes in final
retail price are entirely due to changes in tax structure
and/or tax rate. The tax is assumed to be fully passed on
to consumer prices. Given that data on demand behav-
iour are not available, it is also initially assumed that con-
sumers do not trade up or down (that is, switch to more
or less expensive brands) in response to price increases.
Results
Starting with the first part of the reform for immediate
application (year 1), we increased the excise tax rate such
that total tax (excluding VAT) is equal to 75% of TIRSP.
As excise rate increases, import duty rate is gradually
phased out. The average excise per pack increased by
88% and that resulted in 44% increase in average price
(Table 3).
Cigarette sales and industry revenue are expected to
fall by 11 and 10%, respectively. The change in tax rev-
enue is expected to be even more pronounced. Specifi-
cally, excise and VAT revenue are expected to increase by
67 and 28%, respectively. Import duty revenue, however,
as expected, will be reduced by 11%. The total tax reve-
nue will increase by 44%. The number of cigarette smok-
ers is expected to decline by 5% and the overall smoking
prevalence will fall by 1%.
Due to the ad valorem nature of the excise tax, changes
in key market indicators are expected to be more pro-
nounced for premium brands and smaller for economy
brands. The price dispersion index is 38%, since the most
expensive brand is estimated at SAR 47.37 and the cheap-
est brand at SAR 18.05. The price dispersion index is rela-
tively low, creating opportunities for trading down.
On average, excise revenue increases by 67%, but the
corresponding increase per price segment is 70% for pre-
mium, 62% for mid-priced and 54% for economy brands.
Post tax reform, total tax is around 80% of TIRSP on
average, with this share being higher for low-priced ciga-
rettes (around 87%) due to the minimum import duty to
which they are subjected.
The next step (year 2, in Table 3) involves replacing
import duties with excise duty keeping total tax share
(excluding VAT) constant, that is, set excise tax at 75%
of TIRSP and introduce a MET at 70% of weighted
average price (WAP). The introduction of MET (SAR
Delipalla et al. BMC Public Health (2022) 22:737 Page 5 of 8

Table 3 Simulated tax effects on consumption, revenue and SAR 35, it is estimated that sales drop by 3% and total
number of smokers in Saudi Arabia revenue increases by 10%.
Model predictions In Table 3, we report only the (weighted by sales)
change in price on average (increase of 1%). To gain some
Year 1 Year 2 Year 3
intuition, however, we need to look at what happens at
Average cigarette pack price (SAR) 38 40 41 the three price segments individually. Replacing the ad
Average total tax per pack 30 33 33 valorem tax with the specific tax, in a revenue neutral
Average excise per pack 23 31 31 manner, has distinct effects on the three price segments.
Change in price per pack 44% 8% 1% The average price of the premium segment decreases
Change in average excise per pack 88% 33% 1% (− 3%) whilst the average price of mid-priced and econ-
Import duty as % of final price 13% – – omy segments increases (9 and 10%, respectively). As
Excise tax as % of final price 62% 76% 76% expected, the sales reduction comes from the mid-priced
Total tax as % of final price 80% 81% 81% and economy brands. Due to the tax switch, the excise
Assume: e (premium) = −0.2; e (mid-price) = − 0.3; e (econ- tax share of these segments increases and so does their
omy) = − 0.4 contribution to the tax revenue. On average revenue is
Change in number of smokers - 5% −2% -0.3% constant, as the increase in revenue from mid-priced and
Change in prevalence - 1% -0.4% -0.1% economy segments is offset by the revenue loss from the
Change in sales -11% −4% −1% premium segment (due to the decrease in the excise tax
Change in excise revenue 67% 27% 0% share and their inelastic demand).
Change in VAT revenue 28% 3% 5% Overall, the three-year reform would lead to a higher
Change in import duty revenue -11% – – than 50% increase in cigarette prices, 16% reduction in
Change in total tax revenue 44% 4% 0.2% cigarette sales and almost 50% increase in total cigarette
Change in industry revenue -10% −2% −0.3% tax revenue. The final total tax share would be 81% and
Simulations are performed using the tax simulation model developed by the the excise share 76% of (all-taxes inclusive) final price.
WHO (WHO TaxSim), with 2018 as the baseline year. Estimations are based on Using the estimate that adult smokers were 2,676,978
Euromonitor data for Saudi Arabia for December 2017 and government sources.
VAT Value added tax, SAR Saudi Arabia currency in Rials (1 SAR ~ US $0.27); e:
in 2017 [20], and assuming an overall price elasticity of
own price elasticity of demand for premium, mid-price and economy brands demand equal to − 0.3, we also estimated the number
of deaths averted. Based on the standard estimate that
the elasticity of smoking prevalence accounts for half of
28) has an impact on both mid-priced and economy the total demand elasticity, that one in two of all regu-
brands. Excise tax as percentage of TIRSP is 76% for lar smokers will die eventually, and that all quitters will
mid-priced and 87% for economy brands. Thus, MET survive [21], we estimated that 88,340 deaths related to
has a significant effect especially on economy brands. cigarette smoking would eventually be averted due to the
This reform would lead to a further 8% increase in first year of the tax reform. That is, assuming a preva-
average price, 4% reduction in sales, 4% increase in lence elasticity of − 0.15, a tax increase that would lead
total cigarette tax revenue and, more specifically, 27% to a 44% increase in price, would lead eventually to a 6.6%
increase in excise revenue and 3% increase in VAT reduction in cigarette-related deaths. Assuming a higher
revenue. Furthermore, it will lead to 2% reduction in demand elasticity, of course, would lead to more deaths
number of smokers with 0.4% reduction in smoking averted. For example, at a total demand elasticity equal to
prevalence. − 0.4, cigarette-related deaths would fall by 8.8% (117,787
Finally (year 3, in Table 3), a switch to a revenue-neu- deaths would eventually be averted).
tral specific tax rate is examined. The ad valorem rate is
replaced by a specific excise such that excise tax revenue
remains constant. According to our simulations, this cor- Sensitivity analysis
responds to a specific excise at SAR 31. Even when we Our elasticity assumptions are rather conservative.
adopt a tax reform that keeps excise revenue constant, Increasing cigarette demand elasticity per price segment,
the change in tax structure is estimated to lead to a fur- the estimated reduction in smoking prevalence is higher.
ther 1% increase in average pack price, 1% reduction in Assuming, for example, a demand elasticity of − 0.3,
sales, and 0.3% reduction in number of smokers with − 0.4 and − 0.5 for premium, medium priced and econ-
0.1% reduction in prevalence. Setting a higher specific omy brands respectively (scenario 1), smoking prevalence
rate will lead to further reductions in sales and increases would fall by 1.4% (− 2.3% over the period of 3 years).
in tax revenue. If we set a higher specific excise (than the Assuming, a demand elasticity of − 0.4, − 0.5 and − 0.6
one that guarantees constant tax revenue), for example for premium, medium priced and economy brands
Delipalla et al. BMC Public Health (2022) 22:737
respectively (scenario 2), smoking prevalence would fall
by 1.8% (− 2.5% over the period of 3 years).
Obviously, depending on the elasticity assumptions,
there is a trade-off between a higher decrease in sales and
hence the number of smokers and prevalence rate, and a
lower increase in tax revenue. In scenario 1 and over the
3-year period, sales would fall by 21%, and excise tax rev-
enue and total tax revenue would increase by 84 and 40%,
respectively. In scenario 2 and over the 3-year period,
sales would fall by 28%, and excise tax revenue and total
tax revenue would increase by 75 and 32%, respectively.
Finally, assuming no trading down, we overestimate the
reduction in sales and hence underestimate the increase
in tax revenue. When, we allow for some trading down,
that is, consumers turning to cheaper brands as prices go
up, our results do not change significantly. In the absence
of solid data, it is safer not to make any arbitrary assump-
tions on trading down or up.
Discussion
The recent introduction of excise taxes by five of the six
GCC countries, after five decades of sole reliance on cus-
tom duties, was a significant and major reform of the
tobacco taxation policy. However, as a fulfilment of the
GCC countries obligation under Article 6 of the WHO
Framework Convention on Tobacco Control (FCTC)
[22], tobacco taxation has to be aligned with the WHO
recommendation that tobacco excise taxes account for
at least 70% of the retail prices [3]. Simulations for Saudi
Arabia show that a reform to this direction will lead to
a significant increase in tax revenues and a reduction in
cigarette use. The addition of VAT will contribute further
to higher retail prices for cigarette products and higher
tax revenues.
Our study examined a three-step reform, based on the
WHO recommendations and best practices worldwide.
Each step of the tax reform, and its results, indicate the
significance of the implementation of these best prac-
tices. First, increasing the excise tax rate such that total
tax share is at least 75% of the final consumer price would
lead to substantial reduction in cigarette consumption.
Second, replacing import duties with a higher excise
compensates for revenue lost due to the global trend to
reduce trade barriers. Introducing a MET guarantees
a significant increase in price, especially in the lowest
price segment, and hence in health benefits and public
revenue. Finally, a shift towards specific taxation, even
in a way that keeps revenue constant, leads to a further
reduction in consumption.
Our simulations confirm the expected benefits from
best practices. The tax reform, if implemented, is
expected to lead to a reduction between 5 and 7.3% in
number of smokers, and between 1 to 1.5% in smoking
Page 6 of 8
prevalence, over a 3-years period. Government revenues
are expected to grow by 44 to 48%. The reform will result
in a more robust GCC tax system and in line with WHO
and FCTC recommendations [3, 22].
The tax base must be defined as clearly and as widely
as possible for the tax to be more effective in reduc-
ing tobacco use and raising revenues. Packs of tobacco
products can have a “maximum retail price”, stated on an
affixed tax stamp, which also indicates excise has been
paid in the particular country. This will facilitate identi-
fying products illegally brought into the GCC countries.
Saudi Arabia and UAE have started to implement such a
tracking and tracing system in early 2019 and others are
likely to follow similar procedures [23, 24].
Weak tax administration may lead to inefficiencies in
tax collection and compliance when that tax is ad valo-
rem, increasing the risk of tax avoidance and tax eva-
sion [2]. This potential problem is one of the reasons, but
not the main one, we recommend to gradually switch to
specific excises and introduce a minimum excise floor
[3, 14]. The European Union experience confirms that,
even though price differentials still exist among mem-
ber states, setting a minimum on the share of taxes in
final price and a minimum excise tax, a certain level of
approximation has been reached contributing to a declin-
ing trend in tobacco consumption and a stable trend in
tax revenues [25].
A uniform specific tax is simple and raises price rela-
tively more than an equivalent amount of ad valorem
tax. Set at a high rate, specific taxes tend to reduce price
dispersion and thus downward trading by the most vul-
nerable in society. In addition, specific taxes subdue man-
ufacturers’ incentive to market low-priced products. It is
important specific excises, including MET, be adjusted
for inflation and income growth regularly, to ensure cig-
arettes do not become more affordable as income and
inflation rise.
Governments should abolish duty free sales of tobacco
products and cigarettes sold in packs of 10 or individual
sticks, and small packets of other tobacco products such
as waterpipe tobacco, as they accommodate affordabil-
ity. Abolishing them will help preventing the youth and
children from starting smoking. Manufacturers may be
granted a short grace period to sell existing stock.
The size of the tax reform effects may vary across the
GCC countries but their direction and implications will
be the same, since they share similar market characteris-
tics and harmonized import duties and taxes. Cigarettes
is the most used tobacco product in all countries, with
premium brands dominating the market and Marlboro
being the most popular brand [10]. Although our analy-
sis is based on cigarettes, we believe that the qualitative
results can be generalized to all tobacco products in the
Delipalla et al. BMC Public Health (2022) 22:737
GCC bloc. Given our proposals to increase taxes on all
tobacco products, GCC governments should be vigilant
of the repeated tobacco industry’s lobbying tactics of
using the issue of smuggling in hindering implementation
of tax reforms [26]. A recent publication on the interfer-
ences of the tobacco industry showed how industry rep-
resentatives lobbied individual countries in the GCC to
veto tax increments and defeat consensus on agreed res-
olutions of the Health Ministers’ Council [27].
Limitations of the study
Our study has a few limitations. First, with the excep-
tion of Saudi Arabia, GCC countries did not have data on
consumption on tobacco products by brands and types.
Moreover, any available data related only to cigarettes
and not the full range of tobacco products. However, we
believe that our analysis applies equally to other tobacco
products. Second, data on one country, Saudi Arabia,
are used to generalize results of tax reforms to the other
GCC states, had they applied the same tax structure and
rates. Although, the quantitatively results may differ,
their qualitative nature most certainly will hold.
Conclusions
Our stepwise tax reform, involving changes in both tax
rates and tax structure as well as phasing out of import
duties, is expected to lead to significant improvements in
both public health and tobacco tax revenues. The results
provide useful insights that are of relevance to the whole
GGC region. The effectiveness of the reforms, however,
requires a strong tax and customs administration, includ-
ing the establishment of a good database to monitor and
advance public health.
Tax reforms must be supported by strengthened tax
and customs administration, to ensure efficient and
effective tax introduction and implementation. For a
successful tax reform, data collection and sharing are
paramount. Data collection is very important for under-
standing and addressing tobacco control. The GCC coun-
tries face great challenges in data collection and, hence,
data analysis. Building a good administrative database,
which can be regularly updated, will enable researchers
to estimate accurate tobacco market features for each
individual country and assess the impact of proposed
tobacco policy reforms on both public health and public
revenues. Policy makers can, then, make informed policy
decisions. Political commitment facilitates coordination
of all relevant agencies and contains resistance of vested
interests. Hence, it accelerates reforms. Moreover, pro-
moting national ownership of reform in collaboration
with the WHO enables effective communication with
shareholders and helps overcome their resistance, making
Page 7 of 8
clear what the potential benefits from the reforms, as well
as the costs of maintaining the status quo, are.
Abbreviations
CIF: Cost, Insurance and Freight; FTZ: Free Trade Zone; GCC​: Gulf Coopera‑
tion Council; GDP: Gross Domestic Product; MET: Minimum Excise Tax; SA:
Saudi Arabia; TIRSP: Tax-Inclusive Retail Sales Price; UAE: United Arab Emirates;
VAT: Value Added Tax; WAP: Weighted Average Price; WHO: World Health
Organization.
Acknowledgements
The authors acknowledge the support of relevant colleagues and officials at
Ministries of Health at GCC for facilitating collection of data.
Authors’ contributions
SD, KK, and MS formulated the study concept. JAA, contributed to collection
and acquisition of data. JAA, SD, KK, and YF contributed to literature review,
and write-up of the manuscript. SD and KK conceptualized the methods and
contributed to reviewing results and the write-up of the manuscript. SD, JAA,
and KK conceptualized the costs estimate techniques, reviewed the results
and contributed to the write-up. MS, JAA, AA, EA, KK, AH, and WM contributed
to both design and data collection in the field and the write-up. JAA, SD, KK,
and YF revised the scientific background of the study and contributed to the
literature review and write-up of the manuscript, especially the Discussion
section. All authors read and approved the final manuscript.
Funding
This work is part of the research project ‘Tobacco Economics in the GCC coun-
tries’, funded by the Gulf Health Council, the executive arm of the Council of
Ministers of Health at GCC countries.
Availability of data and materials
The main data (price and sales per cigarette brand), used for the baseline year
of our simulations and supporting the findings of this study, are available from
Euromonitor, under license, and hence are not publicly available. All tax data
relevant to the study are included in the article and are published by the WHO.
Further data would be available upon reasonable request from the Gulf Health
Council.
Declarations
Ethics approval and consent to participate
No required.
Consent for publication
Not required.
Competing interests
All authors declare that they have no conflicts of interest.
Author details
1
University of Macedonia, Thessaloniki, Greece. 2 Ministry of Health, Muscat,
Sultanate of Oman. 3 Gulf Health Council, Riyadh, Kingdom of Saudi Arabia.
4
Ministry of Health, Riyadh, Kingdom of Saudi Arabia. 5 Ministry of Health,
Manama, Kingdom of Bahrain. 6 Ministry of Public Health, Doha, State of Qatar.
7
Ministry of Health, Kuwait City, State of Kuwait. 8 Ministry of Health, Abu
Dhabi, United Arab Emirates. 9 Sultan Qaboos University, Muscat, Sultanate
of Oman.
Received: 12 October 2021 Accepted: 1 April 2022
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 Social Science & Medicine 170 (2016) 161e169

Contents lists available at ScienceDirect

Social Science & Medicine

journal homepage: www.elsevier.com/locate/socscimed

The health, financial and distributional consequences of increases in

the tobacco excise tax among smokers in Lebanon
Nisreen Salti a, *, Elizabeth Brouwer b, Ste
phane Verguet c
a
Department of Economics, American University of Beirut, Beirut, Lebanon
b
Department of Global Health, University of Washington, Seattle, WA, USA
c
Department of Global Health and Population, Harvard T.H. Chan School of Public Health, Boston, MA, USA

a r t i c l e i n f o a b s t r a c t

Article history: Tobacco use is a significant risk factor for the leading causes of death worldwide, including cancer, heart
Received 9 April 2016 disease and stroke. Most of these deaths occur in low- and middle-income countries, where tobacco-
Received in revised form related deaths are also rising rapidly. Taxation is one of the most effective tobacco control measures,
14 October 2016
yet evidence on the distributional impact of tobacco taxation in low- and middle-income countries re-
Accepted 19 October 2016
Available online 20 October 2016
mains scant. This paper considers the financial and health effects, by socio-economic class, of increasing
tobacco taxes in Lebanon, a middle-income country.
An Almost Ideal Demand System is used to estimate price elasticities of demand for tobacco products.
Keywords:
Lebanon
Extended cost-effectiveness analysis (ECEA) methods are applied to quantify, across quintiles of socio-
Tobacco taxation economic status, the health benefits gained, the additional tax revenues raised, and the net financial
Equity consequences for households from a 50% increase in the price of tobacco through excise taxes. We find
Financial risk protection that demand for tobacco is price inelastic with elasticities ranging from
0.32 for the poorest quintile
Distributional consequences to
0.22 for the richest quintile. The increase in tobacco tax is estimated to result in 65,000 (95% CI:
Extended cost-effectiveness analysis 37,000e93,000) premature deaths averted, 25% of them in the poorest quintile, $300M ($256e340M) of
additional tax revenues, 12% borne by the poorest quintile, $23M ($13e33M) of out-of-pocket spending
on healthcare averted, 36% of which accrue to the poorest quintile, 9% to the richest. These savings would
be associated with 23,000 (13,000e33,000) poverty cases averted (63% in the poorest quintile).
Increasing tobacco taxes would lead to large financial and health benefits, and would be pro-poor in
health gains, savings on healthcare, and poverty reduction.
© 2016 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).

1. Introduction 2014b). Without significant intervention, the number of tobacco-

Non-communicable diseases (NCDs) are the leading cause of
death worldwide, and the vast majority of NCD deaths now occur in
low- and middle-income countries (Alwan et al., 2010; Murray
et al., 2015). Half of NCD-related deaths occur during the prime
productive years of adulthood, resulting in substantial societal costs
that extend beyond health service delivery (Bloom et al., 2011).
Tobacco is a significant risk factor for NCDs including cardio-
vascular disease, cancer and stroke. The World Health Organization
(WHO) puts an estimate of the annual economic burden of tobacco-
related illnesses at over $500 billion, which exceeds total annual
health expenditures in low- and middle-income countries (WHO,
* Corresponding author.
E-mail address: nisreen.salti@aub.edu.lb (N. Salti).
related deaths in low- and middle-income countries is projected
to reach 7 million deaths per year by 2030, doubling the level of
2010 (NCD Alliance, 2011).
As a middle-income country, Lebanon is no exception to these
trends. NCDs are the country's main killer, with ischemic heart
disease alone accounting for over 30% of all deaths (IHME, 2013).
Lebanon's disease burden is undoubtedly related to its smoking
prevalence and intensity, which are among the highest in the
Middle East and the highest for women in the Arab world (Salti
et al., 2014; WHO, 2013). Average smoking prevalence rates are
around 43% for men and 28% for women, and these rates have been
consistently rising for decades (Sibai and Hwalla, 2010). Tobacco
consumption increased by an alarming 475% between 1990 and
2012, which ultimately put annual consumption of cigarettes at
2400 per capita, three times the world average (Al-Akhbar English,
2013). In 2008, studies estimated that tobacco consumption cost

http://dx.doi.org/10.1016/j.socscimed.2016.10.020
0277-9536/© 2016 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
162 N. Salti et al. / Social Science & Medicine 170 (2016) 161e169
the Lebanese economy an annual minimum of $325 million, close
to 1% of the country's gross domestic product (GDP) in that year
(Salti et al., 2014). We estimate that total spending on tobacco
products in the Lebanese market is even larger at $850 million (CAS,
2005; National Customs Authority, 2012), just under 2% of GDP.
Despite tobacco's negative impact on both population health
and the economy, the Lebanese government has not fully used the
policy tools at its disposal to stem the epidemic. In 2011, pursuant
to its ratification of the Framework Convention on Tobacco Control
in 2005, the Lebanese parliament passed Law 174 to control the
consumption of tobacco products. Specifically, the law prohibits
smoking in indoor public spaces, bans advertising of tobacco
products, and mandates the inclusion of text and pictorial warnings
on tobacco packaging. Unfortunately, the enforcement of the law
has been patchy at best, particularly in the area of the control of
smoking in public places (Al-Akhbar English, 2014). Tobacco tax
rates in Lebanon are also suboptimal at about 47% of the retail price
for imported cigarettes; the World Health Organization recom-
mends tobacco taxes be at least 70% of the retail price (WHO, 2010).
Tobacco products are also comparatively affordable in Lebanon.
Using the fraction of GDP per capita required to purchase 100 packs
of the most sold brand of cigarettes as an indicator, tobacco prod-
ucts are more affordable in Lebanon than in neighboring or regional
countries, including Jordan, Egypt, Turkey, or the West Bank and
Gaza (WHO, 2015).
Some studies have looked at the consumption and revenue ef-
fects of raising tobacco taxes in Lebanon (Salti et al., 2015) and other
LMICs (Levy et al., 2006; Blecher, 2011a), however these analyses
fail to capture broader economic and health benefits. In this paper,
we conduct an extended cost-effectiveness analysis (ECEA)
(Verguet et al., 2015a, 2015b, 2015c) to examine the distributional
consequences and household financial and health benefits (per
socio-economic group) of a hypothetical increase in the excise tax
on tobacco in Lebanon.
2. Methods
ECEA methods are described in Verguet et al. (2015b), and
particularly in the context of tobacco tax in Verguet et al. (2015a).
Health policy instruments such as public finance or taxation of
tobacco products entail consequences in multiple domains.
Fundamentally, they aim at leading to better health benefits (e.g.
mortality averted), but these policies can also provide non-health
benefits. For instance, tobacco taxes can prevent illness-related
impoverishment and provide financial risk protection. Further-
more, they can improve the distribution of health in the population.
ECEA is meant to evaluate the health and financial consequences of
policies in the following three domains: the health gains, the
financial risk protection benefits, and the distributional (e.g. across
socio-economic groups) benefits. In this study, we draw closely on
the approach used by Verguet et al. (2015a) and conduct an ECEA to
examine the household health and financial benefits, and overall
distributional consequences of increasing the tobacco excise tax in
Lebanon.
First, we identify the price elasticities by age and income groups.
We simulate the effect of an increase in the tobacco excise tax on: i)
the change in out-of-pocket (OOP) expenditures on cigarettes, ii)
the change in government revenue, iii) premature deaths averted,
iv) the change in OOP expenditures on tobacco-related diseases,
and v) associated poverty cases averted. All of these outcomes are
estimated for the current population of smokers. We then use
sensitivity analysis to test our findings with regards to potential
substitute tobacco products. In Appendix 5 of the supplementary
materials, we also translate the result on premature deaths averted
into life years gained.
2.1. Group-based price elasticities
The price of most tobacco products is regulated by the R egie, the
state-run monopoly in charge of regulating the market for tobacco,
and the Ministry of Finance (Tobacco Fact in Lebanon, (2001)).
Using $2.15 as the average price of a pack of imported cigarettes
(Mahdi, 2014), we estimate the effect on current smokers of an
increase in the excise tax that results in a 50% increase in the retail
price of imported cigarettes. The analysis focuses solely on im-
ported cigarettes as they represented about 90% of household
spending on tobacco in 2005, and 75% of total cigarettes smoked
(Chaaban et al., 2010).
The magnitude of the price increase of 50% is chosen because it
would be a politically feasible change in tax. Because, as stated
above, the R egie sets the retail price, the excise tax, and the profit
margins of the distributors and retailers, the R egie also effectively
controls the pass-through rates. At the current ratio of taxes to price
for imported cigarettes (which is 47%), for instance, the Re gie could
decide to increase the price by 50% by increasing taxes. At the
average price of $2.15 per pack, if the price increase of $1.075 were
collected in additional taxes, the resulting tax would be closer to
65% of the new price. In the sensitivity analysis reported in
Appendix 4 of the supplementary materials, we also look at the
outcomes under different scenarios of price increases.
We use data from the Ministry of Public Health from 2011 to
summarize population size and the relative sizes of age cohorts,
focusing on individuals 15 and older (Ministry of Public Health of
Lebanon (2011)). We have prevalence data by 10-year age groups
(IHME, 2013; Sibai and Hwalla, 2010; Global Youth Tobacco Survey
Country Factsheet for Lebanon, 2011) and by income quintile
(National Household Health Expenditure and Use Survey, 1999). In
order to obtain prevalence figures by both quintile and age group,
we use prevalence by age group to calculate the total number of
smokers in each age group. For each age group, we then allocate
these smokers to quintiles by assuming that the distribution of
smokers across quintiles is the same for each age group.
Demand elasticity for tobacco is estimated using primary data
on household consumption from a nationally representative survey
from 2005 (CAS, 2005), and an Almost Ideal Demand System
(AIDS). The methodology is described in detail in Deaton and
Muellbauer (1980) and Deaton (1990). We use spatial variation in
relative prices to estimate elasticities: the Central Administration
for Statistics releases price indexes for each of a number of con-
sumables by district. Price variation in the AIDS model comes from
geographical differences in these price indexes (Deaton, 1990). The
AIDS model consists in running a constrained regression of the
share of imported cigarettes in total household expenditures on a
vector of prices. Elasticities are computed as nonlinear functions of
the regression coefficients. The standard errors of the elasticities
are then calculated using the delta method (by taking a first order
Taylor series approximation) (Hosmer et al., 2008). These elastici-
ties are estimated separately for each quintile. Appendix 7 of the
supplementary materials shows the detailed regression results that
yield these elasticity estimates. Quintiles are defined using house-
hold annual expenditures per adult equivalent, using data from the
same household survey (CAS, 2005). The cutoffs for quintiles are
reported in Table 1.
The results, with elasticities ranging between
0.32 and
0.22
over the five quintiles, are in line with the elasticity of demand for
imported cigarettes estimated at
0.22 in Salti et al. (2015). While
we are able to use our AIDS model to estimate demand elasticities
by quintile, we do not have the data needed to estimate elasticity by
age group or by gender. We assume that the elasticity for those
under 24-years old is twice as large as the elasticity calculated for
the whole population, which is consistent with the evidence
 N. Salti et al. / Social Science & Medicine 170 (2016) 161e169 163

Table 1
Inputs used for the modeling of the increase in tobacco excise tax in Lebanon.

Input Values Data sources

Smoking prevalence by age (%) Male Female GYTS Global Youth Tobacco Survey Country
Under 15 18 6 Factsheet for Lebanon (2011)
15e19 27 13 Sibai and Hwalla (2010)
20e24 38 19 IHME (data for the year 2010); Authors' imputation
25e34 41 18 based on GYTS and Sibai and Hwalla (2010)
35e44 49 33
45e54 55 46
55e64 46 45
65e69 29 21
70e74 31 33
75e79 25 24
80e84 18 19
85þ 18 19

Quintile annual household expenditures (2012 Expenditures Prevalence Household living conditions survey (2005), inflation
USD) per adult equivalent and smoking Q1 $1604 28 (World Development Indicators), National
prevalence rates Q2 $2589 28 Household Health Expenditures and Use Survey
Q3 $3557 27 (NHHEUS) 1999 (data for 1996)
Q4 $4943 25
Q5 $9329 22

Imported cigarettes (in millions of 2012 USD) 339 Customs data, 2012

Expenditures on imported cigarettes by quintile Q1 104 Authors' calculations based on: data on total value
(millions of 2012 USD) Q2 151 of imported cigarettes in 2012 (customs data);
Q3 163 share of each quintile in spending by product
Q4 180 calculated using 2005 household survey data (CAS,
Q5 196 2005).
Total 794

Price of imported cigarettes (per pack, 2012 USD) $2.15

Share of tax in price, imported cigarettes 47% Authors' calculations based on Ministry of Finance
data (Mahdi, 2014)

Distribution of tobacco-related disease mortality, by COPD 6% Global Burden of Disease study (IHME, 2013)
cause (%) Lung cancer 13%
Stroke 19%
Ischemic heart disease 55%
Hypertensive heart disease 3%
Bladder cancer 3%

Reduction in mortality risk by age at quitting 15e24 98% Doll et al., 2004
smoking 25e44 85%
45e64 75%
65þ 25%

Utilization rates of healthcare services by tobacco- Hypertensive 21% Authors' calculations (detailed in the data
related disease Ischemic 43% appendix)
Cerebrovascular 29%
Respiratory neoplasms 49%
Urinary neoplasms 7%
Respiratory 26%

Utilization rates of healthcare services conditional Q1 0.95 Authors' calculations based on NHHEUS 1996
on reporting a health problem (standardized to Q2 0.95
use Quintile 3 as a reference) Q3 1
Q4 1.01
Q5 1.08

Hospitalization cost by tobacco-related disease COPD $951 National Social Security Fund (NSSF) data in Karam
(2012 USD) Lung cancer $2227 (2014). NSSF data is categorized as “Cardiovascular”,
Stroke $951 “Neoplasm” or “Other”.
Ischemic $1466
Hypertensive $1466
Bladder cancer $2227

Fraction of healthcare costs paid out-of-pocket by Q1 83% Coverage rates from Salti et al. (2010), including
quintile Q2 70% reimbursement rates
Q3 60%
Q4 49%
Q5 35%

Poverty line of expenditures (2012 USD) per person $4 International poverty center, 2008
per day

Poverty rate 29% International poverty center, 2008

COPD, chronic obstructive pulmonary disease.

164 N. Salti et al. / Social Science & Medicine 170 (2016) 161e169
reviewed by IARC (IARC, 2011), the WHO (2010) and the Asian
Development Bank (2012). In the same vein, Levy et al. (2006)
find higher elasticities of demand for youth in Vietnam, and Salti
et al. (2015) find that demand for tobacco by households with
younger heads is more elastic. Quintile-based elasticities obtained
from the AIDS model are applied to all age groups above 25, and
doubled for the younger age group.
2.2. Out-of-pocket tobacco expenditures and change in government
revenue
Starting with current expenditures on tobacco by quintile, we
use these estimated quintile-based elasticities to calculate the ef-
fect of a price change on each quintile's expenditures on tobacco
(CAS, 2005; National Customs Authority, 2012). The tax will induce
some smokers to quit, so these additional expenditures on tobacco
are borne by continuing smokers in each quintile. Estimating
changes in OOP expenditures on tobacco by consumers also allows
us to estimate the change in taxes paid by each quintile. We are
thereby able to calculate the change in tax revenue to the
government.
To look at distributional consequences, after dividing the results
by quintile population to get per capita figures, we scale the find-
ings to the level of the average total household expenditures per
adult equivalent in each quintile. This allows us to report in Table 3
the change in tobacco expenditures as a share of total household
expenditures per adult equivalent for each quintile.
We check the robustness of our estimates of the distributional
consequences of this change in expenditures by looking in Fig. 1 at
the effects on this relative share of household expenditures on to-
bacco of different magnitudes of price increases, ranging from 10%
to 100%.
2.3. Premature deaths averted
To calculate deaths averted from an increase in the price of
cigarettes, we assume that half of the price elasticity of demand
estimated is an elasticity of participation, a standard assumption in
Fig. 1. Share of expenditures on imported cigarettes in total household expenditures by quintile for different price changes.
the literature based on findings in several countries (WHO, 2010;
Verguet et al., 2015a; IARC, 2011; Lewit and Coate, 1982; Mullahy,
1985; Wasserman et al., 1991; Evans and Farrelly, 1998). In the
case of Lebanon, this participation elasticity for smoking is calcu-
lated as half the price elasticity of demand for imported cigarettes,
since these account for an overwhelmingly large share of the
market, as mentioned above. Quitters for each age-quintile group
are then directly calculated from the participation elasticity and the
increase in cigarette price that results from the tax. The price
change would also result in reduced tobacco consumption among
continuing smokers, but we do not include the health benefits for
this reduced intensity of smoking in our estimates of health gains.
Only deaths averted from quitting are taken into consideration in
our estimation of health benefits. Doll et al. (2004) estimates of the
effect on the reduced relative risk of death by age at quitting were
used (Table 1). Deaths averted by quitting for each age group are
estimated here as follows: we use a 50-year time frame and assume
that over the next 50 years, half of smokers die of their habit (Doll
et al., 2004). More recent findings on cohorts aged 45 and above
find that as many as two thirds of smokers die from smoking (Banks
et al., 2015), however, we use the more conservative estimates. We
apply this schedule of reduced mortality risk to our estimated
quitters (which differ by age and quintile because of different
prevalence and elasticity by quintile-age group).
2.4. Health system and out-of-pocket costs averted
While there are clear immediate and long-term health benefits
from quitting smoking, from a lifetime perspective, smoking
cessation may also be associated with some healthcare costs and
not just healthcare savings, as the years of life gained from quitting
smoking may come with healthcare costs at advanced ages. How-
ever, work by Hodgson (1992), which compares lifetime healthcare
costs for smokers and non-smokers, shows that smokers incur
higher total lifetime healthcare costs. An updated estimation of the
Hodgson results (Boonn, 2014) using 2009 data, and applying the
Centers for Disease Control estimates of the cessation-association
relative reduction in the risk of death, finds that quitting is
 N. Salti et al. / Social Science & Medicine 170 (2016) 161e169
associated with total lifetime healthcare savings. Similarly, work by
Fishman et al. (2003), and by Rasmussen et al. (2005) also shows
that smoking cessation is associated with a reduction in healthcare
costs for quitters, even in the long run. In this study, we do not take
into account any healthcare costs incurred by quitters in the years
of life gained. We focus instead on estimating the savings for the
health system and for the individual quitter associated with the
deaths averted from quitting, keeping in mind the above cited ev-
idence that quitting is associated with long-run healthcare savings
for both the system and the individual. We limit our calculations of
health spending averted to savings on hospitalization costs.
There are 2 main statistics needed to calculate hospitalization
costs saved by quintile due to the deaths averted: the cost of
tobacco-related hospitalizations and the utilization rate of health-
care services by quintile. We detail the estimation of each of these
two measures in turn.
We consider only five disease groups associated with tobacco
consumption in our calculations of hospitalization costs saved due
to deaths averted. These disease groups are cardiovascular disease,
stroke, chronic obstructive pulmonary disorder (COPD), lung and
bladder cancers. These diseases combined account for the majority
of tobacco deaths, and data on these diseases is available from the
Global Burden of Disease (GBD) study (IHME, 2013). We use hos-
pitalization costs for each of the five diseases (Karam, 2014) and
data on the distribution of tobacco-related deaths across these
causes of death (IHME, 2013) to estimate the cost of a tobacco-
related hospitalization.
Utilization rates by diagnosis are estimated as follows: the
Ministry of Public Health provides data by diagnosis on hospitali-
zations covered by the ministry (Ministry of Public Health, 2011).
These data, in conjunction with the fact that the Ministry of Public
Health covers on average 12% of hospitalizations (UNDP, 1997), are
used to obtain total annual hospitalizations for these diagnosis
groups. As detailed in Appendix 1 of the supplementary materials,
we calculate utilization rates by comparing these imputed total
hospitalizations per year for each diagnosis to the prevalence rates
of the five disease groups (WHO, 2014a; Jurjus et al., 2009;
American Lung Association, Schneider et al., 2007; American
Cancer Society). We thus obtain disease-specific utilization rates
for the whole income scale.
In order to estimate hospitalizations by quintile, we need
quintile-based utilization rates. From the NHHEUS, we have data on
utilization rates by quintile for any healthcare service, conditional
on having a health condition (National Household Health
Expenditure and Use Survey, 1999). These utilization rates are
normalized using the middle quintile as a base and scaling the
utilization rates of other quintiles as relative utilization compared
to the middle quintile. We apply to the disease-specific utilization
rates the relative utilization rates of hospitalizations by quintile to
obtain the utilization rate of hospitalization services by disease/
quintile group. The health system savings on hospitalization costs
are calculated for each quintile by multiplying the deaths averted
by the average cost of a smoking-related hospitalization and the
utilization rates by quintile and by disease. Subsequently, we derive
the savings in OOP health expenditures using the share of health-
care costs paid out of pocket by expenditure quintile, reported in
Table 1 (Salti et al., 2010). OOP health expenditures averted are
calculated keeping in mind that insurance plans cover acute health
expenditures associated with hospitalizations due to tobacco-
related illnesses, and patients without insurance coverage pay out
of pocket. We assume that quitters in each quintile have the same
insurance coverage rate as the overall quintile. In each quintile, we
estimate OOP expenditures by applying to the hospitalization costs
incurred by the quintile (described above) the insurance coverage
rate of the same quintile.
165
2.5. Cases of poverty averted
OOP health expenditures averted by quintile are then used to
estimate the number of poverty cases averted. The reasoning
here is that for some quitters, money they would have spent on
healthcare is now made available to spend on consumption. We
assume that these health savings raise expenditures, and there-
fore lift the individuals' position relative to the poverty line. The
World Bank puts the poverty line for Lebanon at $4 of spending
per person per day in 2008. Adjusted for inflation using World
Bank estimates of the Consumer Price Index (CPI) and the Gross
Domestic Product (GDP) deflator, the poverty line stands at $5.5
in 2012. The poverty headcount estimated by the Ministry of
Social Affairs is 29% of the population and the poverty gap is 9%
(International Poverty Center, 2008). With a poverty rate of 29%,
all of the bottom quintile is below the poverty line, and 40% of
the second quintile is poor. These figures are consistent with our
findings for average household consumption per capita, which
stand at below the poverty line for the lowest quintile and above
it for the second quintile. We assume that deaths averted in the
second quintile are uniformly distributed over the quintile, so
that the incidence of poverty among quitters from the second
quintile is the same as the incidence of poverty of the overall
quintile (at 40%). So for the second quintile, in order to estimate
the effect of the OOP health savings on poverty, we consider the
40% of quitters from the second quintile that fall below the
poverty line before the tax increase. Because we do not know the
effect on OOP health spending of reducing the intensity of
smoking for continuing smokers, we do not estimate the effect of
the tax on the poverty status of smokers who continue to
consume tobacco after the tax. It is likely, therefore, that our
analysis underestimates the true benefits of an increase in to-
bacco tax rate.
2.6. Sensitivity analysis
We run a number of sensitivity tests of our main results that
allow us to check the sensitivity of our results to some of the
simplifying assumptions made and to investigate the robustness of
the main findings to extensions in the types of tobacco products
consumed and the choice of parameters.
The results pertaining to the distribution of outcomes are ob-
tained under a number of assumptions which we re-examine in
turn: we first reconsider the assumption about the elasticity of
younger consumers, and report the results in Appendix 2 of the
supplementary materials, we then vary the assumption about the
share of participation in the elasticity of demand for cigarettes and
report the results in Appendix 3 of the supplementary materials.
We expand our analysis of the effect of tobacco taxes on tax
revenues and household expenditures on tobacco by quintile to
include three tobacco products: in addition to imported cigarettes,
considered in the main analysis, we now also look at locally pro-
duced cigarettes and waterpipe (or hookah) tobacco. We use the
same AIDS model to calculate own- and cross-price elasticities for
all three tobacco products in Lebanon and we estimate these
separately by expenditure quintile. We then estimate the resulting
tax revenue and household expenditures on tobacco while taking
into account possible substitutions across tobacco products. This
extension is reported in Appendix 4 of the supplementary
materials.
We also consider different scenarios for the increase in taxes,
including a 25% and a 100% increase in retail price.
The AIDS model is run using STATA 12.0. All data on inputs are
shown in Table 1.
166 N. Salti et al. / Social Science & Medicine 170 (2016) 161e169
3. Results
Table 2 shows point estimates for own-price elasticity of de-
mand for imported cigarettes. It also shows 95% confidence in-
tervals for the elasticities. Demand is inelastic for the entire range
of the 95% confidence interval for each quintile. The point estimates
of elasticities are monotonically increasing as we move from richer
to poorer socio-economic groups, ranging from
0.32 (95%
CI
0.47:
0.18) for the poorest quintile to
0.22 (
0.31:
0.14) for
the richest. This inverse relationship between the sensitivity of
demand and socio-economic status is in line with the findings in
the literature. Regressions in the AIDS model are run separately for
each quintile. Each elasticity estimate is based on a regression for
1045 households in that quintile. The full details of the regressions
are reported in Appendix 7 of the supplementary materials.
Tobacco expenditures increase for all expenditure quintiles,
however the magnitude of this increase is relative. When scaled to
household expenditures per adult equivalent, this extra spending
on tobacco products amounts to 2.1% (CI: 1.2%e2.9%) of total
household expenditures per adult equivalent for the poorest
expenditure quintile, and 0.9% (CI: 0.7%e1%) for the top quintile.
This additional burden falls on continuing smokers in each quintile.
The distribution across expenditure quintiles of the added ex-
penditures on cigarettes is different depending on the level of
cigarette price increase. Fig. 1 shows the size of the increase in
spending on cigarettes scaled to household expenditures per adult
equivalent for each quintile, and tracks this ratio for different levels
of price increases ranging from 10 to 100%. The figure shows that for
relatively large increases in price, the effect on expenditures on
cigarettes as a share of total household expenditures per adult
equivalent peaks for the second poorest quintile. For price increases
in the middle range (25%e45%), the effect on the poorest and sec-
ond quintiles is similar, and larger than for the wealthier quintiles.
For smaller price increase, the added share of household expendi-
tures per adult equivalent devoted to cigarettes is highest for the
poorest quintile and decreases monotonically over the income
scale. These results are driven by the underlying distribution of
household expenditures per adult equivalent as well as the quintile
differences in smoking prevalence and elasticities.
A direct implication of the increased overall expenditures on
tobacco is an increase in government revenue. We simulate a 50%
increase in price that is entirely levied by the government, since the
Regie regulates the tobacco market. The price increase would result
in higher tax revenues by close to $300 million per year (95% CI:
$256M-$340M), which represents an 80% (95% CI: 68%e91%) in-
crease in tax revenues from imported cigarettes. Nearly 26% of the
extra tax burden is financed by the richest quintile while only 12% is
borne by the poorest.
In Table 3, we examined the premature deaths averted among
current smokers over the course of their lifetime. A 50% increase in
the price of tobacco would avert close to 65,000 premature deaths
from among estimated quitters (95% CI: 37,000e93,000), over 25%
Table 2
Results from application of the Almost Ideal Demand System (AIDS) model.
Price elasticity of demand for imported tobacco by income quintile (95%
confidence interval)
Q1 (poorest)
0.32 (
0.47
Q2
0.27 (
0.36
Q3
0.26 (
0.40
Q4
0.24 (
0.34
Q5 (richest)
0.22 (
0.31
Source: authors' calculations from AIDS model applied to data from national survey
of living conditions of households (2005) [11]. Full regression results from the AIDS
model available upon request from the authors.
of which accrue to the poorest expenditure quintile. The distribu-
tion of deaths averted is monotonically progressive with only 14% of
deaths averted from the richest expenditure quintile. In the sensi-
tivity analysis, we re-examine this result while loosening the
assumption about a higher elasticity of demand for the youth. The
deaths averted are, unsurprisingly, slightly lower when the elas-
ticity is assumed to be age-invariant, ranging from 13,500 (95% CI:
7600e19,800) in the poorest quintile to 7500 (95% CI:
4700e10,500) in the richest, but the overall distribution of deaths
averted remains progressive across all 5 quintiles. The magnitude of
the findings on deaths averted is also sensitive to the assumption
about the share of participation in the overall elasticity of demand,
but again, the pattern observed on the distribution of deaths
averted over quintiles is qualitatively robust to the fraction of
elasticity attributed to participation (Appendix 3 of the supple-
mentary materials).
The deaths averted are associated with savings on health
spending estimated at almost $37 million (95% CI: 21M-53M),
which amounts to close to $22 million in household OOP savings.
Scaled to the total number of smokers, these figures represent
around $41 of health care system savings per smoker per year, or
around $26 of OOP savings per smoker per year. Of the household
OOP savings, 36% accrue to the poorest quintile while only 9% are
for the richest. These savings represent close to 0.6% (95% CI: 0.3%e
0.9%) of household expenditures by adult equivalent for the poorest
quintile. In appendix 6 of the supplementary materials, these sav-
ings are shown in net present value, discounted over 50 years
(assuming they accrue for each cohort when the quitter reaches life
expectancy) using a 3% per year discount rate. When we assume no
difference between the elasticity of younger and older cohorts,
these savings are slightly smaller in size, as expected, but their
distribution across quintiles remains qualitatively unchanged both
for total health system savings as well as OOP savings for house-
holds (Appendix 2 of the supplementary materials).
OOP healthcare spending on tobacco-related diseases can have
an impoverishing effect and push households below the poverty
line. We estimate the number of poverty cases averted from a 50%
price increase on imported cigarettes at close to 27,000 individuals
(13,000e32,000), 63% of whom would be in the poorest quintile.
This represents 2.0% of all people in the poorest quintile and around
1.2% of people in the second poorest quintile. When the elasticities
for young and old are assumed to be the same, the poverty impli-
cations of the tax increase are again qualitatively unchanged, as
shown in Appendix 2 of the supplementary materials: even when
health expenditures averted are smaller, they are sufficient per
quitter to lift above the poverty line all quitters with a household
consumption per capita equal to the quintile average for the lowest
quintile. For the second quintile, if we maintain the assumption
that the average household consumption spending per capita of
quitters is uniformly distributed over the quintile, then the 40% of
quitters who are below the poverty line before the tax benefit from
sufficient health savings to push them out of poverty.
4. Discussion
Lebanon is currently one of the cheapest places to buy both
imported and local cigarettes in the Arab region: as mentioned
above, cigarettes are less affordable in Jordan, Egypt, Turkey,

0.18) Cyprus, and the West Bank and Gaza (WHO, 2015). With taxes

0.17)
totaling only 47% of the price (Mahdi, 2014), there is hence sub-

0.12)

0.14) stantial room to increase these taxes.

0.14) Our price elasticity findings fall on the more inelastic end of the
range of estimates for other middle-income countries, with Egypt
at
0.27 to
0.82 (Nassar, 2003), Turkey at
0.41 (Onder, 2002) and
South Africa at
0.46 (Blecher, 2011b). These are also similar to the
 N. Salti et al. / Social Science & Medicine 170 (2016) 161e169 167

Table 3
The impact of a 50% increase in the price of imported cigarettes on health, spending and tax revenues (95% confidence interval).

Q1 (poorest) Q2 Q3 Q4 Q5 (richest) Total

Premature deaths averted 17,000 (9400 14,400 (9000 13,300 (6100 11,000 (6500 9000 (6000 65,000 (37,000
e24,600) e19,000) e21,000) e16,000) e13,000) e93,000)
Additional excise tax revenues in millions of USD 36 (28e43) 56 (49e63) 60 (50e72) 69 (60e78) 77 (69e85) 300 (256e341)
% of total borne by quintile 12.0% 18.6% 20.4% 23.1% 25.8%
% of household expenditures/adult equivalent 2.8% 2.7% 2.1% 1.7% 1.0% 1.7%
Change in expenditures on tobacco products (in millions of 27 (15e38) 45 (35e56) 50 (33e67) 58 (44e71) 66 (52e77) 245 (179e310)
USD)
% of household expenditures/adult equivalent 2.1% (1.2%e2.9%) 2.1% (1.7%e2.7%) 1.7% (1.1%e2.3%) 1.4% (1.1%e1.8%) 0.9% (0.7% 1.4% (1.0%e1.7%)
e1.0%)
Expenditures on tobacco-related disease treatment averted 9 (5e13) 8 (5e10) 8 (4e12) 6 (4e8) 5 (4e8) 37 (21e53)
(in millions of USD)
Out-of-pocket expenditures averted by households (in 8 (4e11) 5 (3e7) 4 (2e7) 3 (2e4) 2 (1e3) 22 (13e33)
millions of USD)
% of all savings accruing to Q 36% 23% 18% 14% 9%
% of household expenditures/adult equivalent 0.60% (0.30 0.20% (0.16 0.10% (0.07 0.07% (0.05 0.02% (0.01 0.10% (0.07
e0.86%) e0.35%) e0.24%) e0.11%) e0.04%) e0.18%)
Poverty cases averted 17,000 (9400 9800 (3600 0 0 0 26,800 (13,000
e24,600) e7600) e32,200)
Fraction of Q moving out of poverty 2.0% 1.2% e e e e

findings of Levy et al. for Vietnam (Levy et al., 2006). Other studies
that use an AIDS approach find elasticities on the order of
0.53 for
Vietnam (Eozenou and Fishburn, 2009).
Tobacco taxation is a well-established measure for decreasing
tobacco consumption (Levy et al., 2006; Blecher, 2011a,b; IARC,
2011). While some studies have looked at the distributional
impact of raising tobacco taxes in high-income settings (Colman
and Remler, 2008; Warner, 2000; Chaloupka and Warner, 2000)
and found mixed results, few studies have considered the distri-
butional consequences and equity of such measures (Verguet et al.,
2015a). This study adds to the literature by examining the effect of
an increase in the excise tax on tobacco in Lebanon by quintile.
In this paper, we look at five outcomes, by expenditure quintile,
of a 50% increase in tobacco price. We find that nearly 65,000
deaths are averted, over 25% of which are from the poorest quintile.
Health gains are progressively distributed, with a larger advantage
accruing to the poorer quintiles. We estimate that $37 million of
health expenditures are averted, $22 million of them paid out of
pocket by households. Of these, 36% are saved by the poorest
quintile. Rehm et al. (2006) find that hospitalizations constitute
56% of total economic costs of tobacco in Canada. Using the same
cost breakdown, our findings of $37 million in savings from averted
hospitalizations would be associated with around $246 million in
total economic savings, including productivity losses averted. Using
findings from similar research in the UK (ASH, 2015) would put a
lower bound on total economic savings associated with the averted
hospitalizations at $270 million.
The health expenditures averted result in 17,000 cases of
poverty averted in the poorest quintile. The total number of poverty
cases averted is close to 27,000, around 2.3% of the poverty
headcount.
The effects on health spending and the resulting poverty
reduction are therefore also pro-poor. When we compare the
fraction of deaths averted and the fraction of the total tax burden
accruing to the lowest quintile, our results are in line with some of
the findings in the literature: a study by the Asian Development
Bank (2012) finds that the benefit to tax ratio for groups with the
lowest socioeconomic status for a 50% price increase is around 1.4
for Vietnam, 1.5 for India and 1.9 for the Philippines. The ratio we
obtain for Lebanon is 2.2.
Household expenditures on tobacco would increase by $245
million, 11% of which are spent by the poorest quintile and 27% by
the richest. As a fraction of total household expenditures, however,
the additional spending on tobacco is a larger share of household
expenditures for poor quintiles (2.1%) than that of rich quintiles
(0.9%). Tax revenues increase by close to $300 million. 12% of the
additional tax burden is borne by the poorest quintile, and over 26%
is financed by the richest quintile, financed entirely by continuing
smokers in each quintile.
The distribution of additional expenditures on tobacco as a
fraction of household expenditures is linked to several factors: the
differences in the prevalence of smoking across quintiles, the dif-
ferences in elasticities across quintiles, and the underlying degree
of inequality in household expenditures across quintiles. The dis-
tribution of the additional burden of tobacco expenditures is also
sensitive to the magnitude of the change in price. Larger price
changes result in changes in the share of tobacco in household
expenditures that are more pro-poor among the poorest 2 quin-
tiles, but they remain less of a burden in terms of relative expen-
ditures in the upper tail of the distribution (Fig. 1).
The difference between total and OOP savings on healthcare is in
the form of savings accruing to the health system. These savings,
along with the additional tax revenue (which is estimated to be of
very large magnitude), give fiscal authorities a lot of room to correct
any adverse distributional effects of additional expenditures on
tobacco, particularly on continuing smokers in the lowest quintiles.
Distributional considerations provide a more nuanced under-
standing of how tobacco taxation affects a population and should
therefore be taken into account in any tobacco control policy. The
results in this paper show that when several outcomes are
considered collectively, raising taxes on tobacco would have several
pro-poor results.
Nevertheless, we rely on a series of assumptions. Our estimates
of health gains are a conservative lower bound because of five
simplifying assumptions: i) we only consider the health gains that
accrue to quitters, and we exclude health gains that come from a
reduction in the intensity of smoking for continuing smokers; ii) we
underestimate quitters as we calculate them based only on the
elasticity of demand for imported cigarettes and ignore, in this
calculation, the other two tobacco goods we consider, which have
far more elastic demand; iii) we exclude health gains from reduced
exposure to second-hand smoke; iv) we only look at deaths averted
and do not take into account other improvements in health; and v)
we assume that all quintiles have similar age compositions, and
that quintile differences in smoking prevalence are similar for each
age cohort, when in fact the differences are likely driven by a higher
concentration of younger age cohorts in poorer quintiles, which
would mean larger health benefits than we estimate. Our estimates
168 N. Salti et al. / Social Science & Medicine 170 (2016) 161e169
of the related savings on health care spending are also conservative
since we also only look at hospitalization costs, only for deaths
averted and only for the five disease groups considered. We ignore
other health spending and other cases of health gains.
The price measures recommended in the Framework Conven-
tion on Tobacco Control and the tax share of price advocated by the
World Health Organization all point to the health and public rev-
enue benefits of increasing taxes on tobacco products. In this study,
we look further into the distribution of these two benefits and show
that raising taxes on tobacco is pro-poor in health gains and the
resulting poverty cases averted. We also find that the sheer
magnitude of additional tax revenues in addition to the health
system savings in the case of Lebanon are larger than any loss from
the burden of additional relative spending on tobacco products that
poorer continuing smokers may suffer from as a result of the tax,
and these added tax revenues would therefore be sufficient to
compensate poorer consumers through cessation programs, assis-
tance in health care spending or other cash assistance policies
targeted at smokers in the lowest quintiles.
Acknowledgements
This work was funded by the Bill & Melinda Gates Foundation
(OPP51229) through the Disease Control Priorities Network grant.
The funding agency had no influence on the research and the
findings. Ms. Shogher Ohannessian provided excellent research
assistance.
Appendix A. Supplementary data
Supplementary data related to this article can be found at http://
dx.doi.org/10.1016/j.socscimed.2016.10.020.
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 Articles

The health and economic burden of smoking in 12 Latin

American countries and the potential effect of increasing
tobacco taxes: an economic modelling study
Andrés Pichon-Riviere, Andrea Alcaraz, Alfredo Palacios, Belén Rodríguez, Luz Myriam Reynales-Shigematsu, Márcia Pinto,
Marianela Castillo-Riquelme, Esperanza Peña Torres, Diana Isabel Osorio, Leandro Huayanay, Cesar Loza Munarriz, Belén Sáenz de Miera-Juárez,
Verónica Gallegos-Rivero, Catherine De La Puente, María del Pilar Navia-Bueno, Joaquín Caporale, Javier Roberti, Sacha Alexis Virgilio,
Federico Augustovski, Ariel Bardach

Summary
Background Worldwide, smoking tobacco causes 7 million deaths annually, and this toll is expected to increase, Lancet Glob Health 2020;
especially in low-income and middle-income countries. In Latin America, smoking is a leading risk factor for death 8: e1282–94
and disability, contributes to poverty, and imposes an economic burden on health systems. Despite being one of the This online publication has
been corrected. The corrected
most effective measures to reduce smoking, tobacco taxation is underused and cigarettes are more affordable in
version first appeared at
Latin America than in other regions. Our aim was to estimate the tobacco-attributable burden on mortality, disease thelancet.com/lancetgh on
incidence, quality of life lost, and medical costs in 12 Latin American countries, and the expected health and economic Sept 24, 2020
effects of increasing tobacco taxes. For the Portuguese translation of
the abstract see Online for
appendix 1
Methods In this modelling study, we developed a Markov probabilistic microsimulation economic model of the
natural history, medical costs, and quality-of-life losses associated with the most common tobacco-related diseases in For the Spanish translation of the
abstract see Online for
12 countries in Latin America. Data inputs were obtained through a literature review, vital statistics, and hospital appendix 2
databases from each country: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Honduras, Mexico, Instituto de Efectividad Clínica
Paraguay, Peru, and Uruguay. The main outcomes of the model are life-years, quality-adjusted life-years, disease y Sanitaria (IECS)/Institute for
events, hospitalisations, disease incidence, disease cost, and healthy years of life lost. We estimated direct medical Clinical Effectiveness and
costs for each tobacco-related disease included in the model using a common costing methodology for each country. Health Policy, Buenos Aires,
Argentina
The disease burden was estimated as the difference in disease events, deaths, and associated costs between the results (A Pichon-Riviere PhD,
predicted by the model for current smoking prevalence and a hypothetical cohort of people in each country who had A Alcaraz MD, A Palacios MSc,
never smoked. The model estimates the health and financial effects of a price increase of cigarettes through taxes, in B Rodríguez MD, J Caporale MSc,
terms of disease and health-care costs averted, and increased tax revenues. J Roberti PhD, S A Virgilio MSc,
F Augustovski PhD,
A Bardach PhD); Consejo
Findings In the 12 Latin American countries analysed, we estimated that smoking is responsible for approximately Nacional de Investigaciones
345 000 (12%) of the total 2 860 921 adult deaths, 2·21 million disease events, 8·77 million healthy years of life lost, Científicas y Técnicas
and $26·9 billion in direct medical costs annually. Health-care costs attributable to smoking were estimated to (CONICET), Buenos Aires,
Argentina (A Pichon-Riviere,
represent 6·9% of the health budgets of these countries, equivalent to 0·6% of their gross domestic product. Tax F Augustovski, A Bardach);
revenues from cigarette sales cover 36·0% of the estimated health expenditures caused by smoking. We estimated Escuela de Salud Pública,
that a 50% increase in cigarette price through taxation would avert more than 300 000 deaths, 1·3 million disease Facultad de Medicina,
events, gain 9 million healthy life-years, and save $26·7 billion in health-care costs in the next 10 years, with a total Universidad de Buenos Aires,
Buenos Aires, Argentina
economic benefit of $43·7 billion. (A Pichon-Riviere,
F Augustovski); Departamento
Interpretation Smoking represents a substantial health and economic burden in these 12 countries of Latin America. de Prevención y Control del
Tabaquismo, Centro de
Tobacco tax increases could successfully avert deaths and disability, reduce health-care spending, and increase tax
Investigación en Salud
revenues, resulting in large net economic benefits. Poblacional, Instituto Nacional
de Salud Pública, Cuernavaca,
Funding International Development Research Centre (IDRC), Canada. Morelos, Mexico
(L M Reynales-Shigematsu PhD);
Instituto Nacional de Saúde da
Copyright © 2020 The Author(s). Published by Elsevier Ltd. This is an Open Access article under the CC BY 4.0 Mulher, da Criança e do
license. Adolescente Fernandes
Figueira, Fundação Oswaldo
Introduction Moreover, smoking-related diseases cause a substantial Cruz, Rio de Janeiro, Brazil
(M Pinto DSc); Departamento
Worldwide, smoking tobacco is expected to cause economic burden on individuals and health systems, de Economía de la Salud,
7·5 million deaths in 2020 and is the second biggest risk which can be up to US$500 billion globally per year, Ministerio de Salud de Chile,
factor for death and disability.1,2 Tobacco is responsible including costs of productivity loss, illnesses, and Santiago, Chile
(M Castillo-Riquelme MSc);
for 65% of deaths due to lung cancer worldwide, 44% of premature deaths, representing up to 1·5% of the gross
Instituto de Evaluación
deaths due to chronic obstructive pulmonary disease, domestic product of individual countries and up to 15% Tecnológica en Salud, Bogotá,
and 22% of deaths due to ischaemic heart disease.1,3 of all national health expenditures.4 Colombia (E Peña Torres MSc,

www.thelancet.com/lancetgh Vol 8 October 2020 e1282

 Articles

D I Osorio MSc); Universidad

Peruana Cayetano Heredia,
Lima, Peru (L Huayanay MD,
C Loza Munarriz MD);
Departmento de Economia,
Universidad Autónoma de Baja
California Sur, La Paz, Baja
California Sur, Mexico
(B Sáenz de Miera-Juárez PhD);
Centro Nacional de Excelencia
Tecnológica en Salud,
Secretaría de Salud, Mexico
(V Gallegos-Rivero PhD); CIGES,
Universidad de la Frontera,
Temuco, Chile
(C De La Puente MSc); and
Facultad de Medicina,
Universidad Mayor de San
Andrés, La Paz, Bolivia
(M d P Navia-Bueno MD)
Correspondence to:
Prof Dr Andrés Pichon-Riviere,
Instituto de Efectividad Clínica y
Sanitaria (IECS),
Dr Emilio Ravignani 2024,
C1414CPV Buenos Aires,
Argentina
apichon@iecs.org.ar
Research in context
Evidence before this study
We searched PubMed on Sept 15, 2019, using the search terms
(tobacco use disorder[MeSH] OR tobacco use[tiab] OR
smoking[MeSH] OR smoking[tiab] OR cigar*[tiab]) AND (cost
of illness[MeSH] OR models, economic[MeSH] OR costs and
cost analysis[MeSH] OR taxes[MeSH] OR taxation*[tiab]) AND
(Argentina[MeSH] OR Bolivia[MeSH] OR Brazil[MeSH] OR
Chile[MeSH] OR Colombia[MeSH] OR Costa Rica[MeSH] OR
Ecuador[MeSH] OR Honduras[MeSH] OR Mexico[MeSH] OR
Paraguay[MeSH] OR Peru[MeSH] OR Uruguay[MeSH] OR Latin
America[MeSH]). We searched for primary research, modelling
studies, and reviews published between Jan 1, 2010, and
Aug 31, 2019, with no language restrictions. We found
20 studies on models and disease burden, 16 reviews,
15 articles about taxation, and three primary research reports.
Smoking is a leading risk factor for premature morbidity and
mortality. If trends are not reversed, the tobacco-attributable
burden on health and economies will continue to increase in
low-income and middle-income countries. High excise taxes on
tobacco could be essential to reduce tobacco use, but they are
underused in Latin America. There are few published studies
that have quantified both the burden of tobacco and the
impact of higher tobacco taxes on health and financial
outcomes in Latin America.
Added value of this study
Our study shows that smoking tobacco causes a substantial
proportion of the burden of disease and health-care costs in
12 Latin American countries each year. Current tobacco taxes
cover just 36·0% of the direct medical costs caused by smoking
in these countries. We estimate that a 50% increase in tobacco
prices would save around 300 000 deaths and 9 million healthy
life-years in the next 10 years; and would produce economic
benefits of more than US$40 billion because of averted
treatment costs and increased tax revenues.
Implications of all the available evidence
Higher tobacco taxes could be one of the most powerful tools
to decrease the use of tobacco. In Latin America, tobacco
taxation is underused, and cigarettes are more affordable than
in other regions. Evidence supports that higher tobacco taxes
can reduce tobacco use, avert tobacco-related mortality and
morbidity, and lead to reduced health-care expenditures and
poverty.

The WHO Framework Convention on Tobacco Control
(FCTC) is included in the Sustainable Development
Goals, signed by more than 100 countries in
September 2015, at the UN General Assembly. Among
the measures proposed in the FCTC, an increase in the
inflation-adjusted price of tobacco is a realistic and
effective strategy to reduce smoking because, despite the
highly addictive nature of cigarettes, the demand for
tobacco is strongly influenced by its price.5 However, only
a few countries have substantially increased specific
excise taxes on tobacco in an attempt to reduce smoking.5
Indeed, raising taxes on tobacco is the least often
implemented measure of those established by the FCTC.
It is estimated that increasing cigarette taxes by 10%
would increase tax revenues by an additional 7%;
however, in most low-income and middle-income
countries, cigarette taxes are under­used.3 Many countries
have extremely low tobacco tax rates, and some countries
do not levy any tobacco taxes.6
In Latin America, smoking is among the five leading
risk factors for death and disability, and contributes to
poverty via decreased productivity and an impact on out-
of-pocket expenses.2,7 Smoking accounts for $34 billion in
direct medical costs every year, which represents a
substantial proportion of Latin American health budgets.8
Most Latin American countries have signed the FCTC,
but many still do not have a strong tobacco-control policy.
Misinformation, prejudice, an absence of country-level
comprehensive data, and pressure from interest groups
have delayed the implementation and the enforcement of
key measures in Latin America.9 Many of these measures,
such as tax increases, are also politically challenging. To
foster the implementation of effective tobacco-control
policies in the region, it is necessary to obtain relevant,
country-level information on the health and economic
consequences of smoking tobacco and how these relate
to individuals, families, communities, and countries.
Moreover, this information is needed to raise awareness
and advocate for the adoption of measures and
mobilisation of resources to control tobacco. The absence
of reliable information in several countries in the region
on the true burden of smoking, and on the potential effect
of the interventions, delays the application of stronger
measures. The aims of this study are to estimate the
tobacco-related burden on disease, mortality, and direct
medical costs in 12 countries in Latin America, and to
estimate the health and financial effect of different levels
of tobacco taxation.
Methods
Study design and model development
This economic modelling study estimated the tobacco-
related burden on disease and the potential effect and
cost-effectiveness of tobacco control interventions in
12 Latin American countries: Argentina, Bolivia, Brazil,
Chile, Colombia, Costa Rica, Ecuador, Honduras, Mexico,
Paraguay, Peru, and Uruguay. The study was part of a
collaborative project that included researchers, decision
makers, and academic institutions from these
12 countries.
To inform the model development, we did a compre­
hensive analysis of the availability and quality of

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epidemiological and health-care cost data in the region,
and of policy makers’ information needs for the imple­
mentation of tobacco-control interventions. The model is
a state transition or Markov probabilistic microsimulation
of individuals (first-order Monte Carlo technique)
including natural history, direct medical costs, and quality-
of-life losses associated with the most common tobacco-
related diseases (coronary and non-coronary heart disease,
cerebrovascular disease, chronic obstructive pulmonary
disease, pneumonia, influenza, lung cancer, and nine
other neoplasms).
During the past 9 years, the model was validated and
used in various Latin American countries to estimate the
burden of disease attributable to smoking and the
potential effect of different interventions. More detail can
be found in previous publications8,10–14 and in the reports
and technical documents for the 12 countries included in
this analysis.
Baseline incidence risks in people who had never
smoked tobacco were estimated for each health condition
and each country from mortality statistics. For acute
events, age and sex specific incidence (absolute risk) was
calculated on the basis of specific mortality and the
lethality of the event as
Rdeath
Rpop.event =–
L
where Rdeath is the specific mortality per age and sex and
L is lethality. Once the absolute risk was obtained, the
baseline risk for people who had never smoked tobacco
was calculated from the specific prevalence of tobacco
use per age and sex, as well as the relative risk (RR) for
each condition for people who currently smoke or
formerly smoked:
Rpop.event
Rnonsmk = . use prevalence was obtained from local tobacco Global
(RRsmk × fsmk) + (RRfrsmk × ffrsmk) + fnonsmk
In this calculation, Rnonsmk is the annual incidence of the
acute disease event for people who have never smoked,
Rpop.event is the specific population risk per age and sex (from
the previous formula), RRsmk and RRfrsmk are the relative
risks of the event in people who smoke and people who
used to smoke versus people who have never smoked, and
fsmk, ffrsmk, and fnonsmk are the specific proportions of people
who smoke, people who used to smoke, and people who
have never smoked per age and sex (the RRs by condition
are in appendix 3, p 3).
For lung cancer, the annual incidence for each age and
sex strata was calculated from annual mortality rates
from national statistics and the annual estimated survival
after diagnosis:
(Σ
Rdxi =
10
(
RM(i + n) × P(i + n) × –
1 –
1
S10
n=0
www.thelancet.com/lancetgh Vol 8 October 2020
Articles
where Rdxi is the estimated incidence at age i, RM(i + n) is the
general population risk of death at age i + n, Pn is the
conditional probability of dying in year n after being
diagnosed, and S10 is the proportion of individuals
surviving after 10 years. For other cancers, specific
incidence rates for each age and sex strata were estimated
from Global Cancer Observatory data for each country.15
Individuals were followed up in hypothetical cohorts,
from age 35 years to death, and the model estimated in
annual cycles the individual risks of disease incidence,
disease progression, and death, on the basis of the
individual’s demographic attributes, smoking status,
previous clinical conditions, and underlying risk equa­
tions. Using the simulation of each individual’s lifetime,
health outcomes were calculated to obtain aggregated
results. The main outcomes of the model are life-years, For reports from Instituto de
quality-adjusted life-years, disease events, hospitalisations, Efectividad Clinica y Sanitaria
see www.iecs.org.ar/tabaco
disease incidence, disease cost, and healthy years of life
lost (which aggregate health losses both due to years lost
by premature mortality as well as quality-of-life losses).
Information sources
Data to populate the model were obtained through a
comprehensive review of the literature. The following
electronic databases were used: MEDLINE, Embase,
Cochrane Central Register of Controlled Trials, SocINDEX,
EconLit, Latin American and Caribbean Health Sciences
Literature, National Bureau of Economic Research, Centre
for Reviews and Dissemination and Cost Effectiveness
Analysis Registry, the International Tobacco Health
Conference Paper Index, and Cochrane Tobacco Addiction
Review Group register. Grey literature was reviewed from
ministries of health, ministries of finance, Pan American
Health Organization, and data­bases containing regional
congress proceedings. Updated information on tobacco
Adult Tobacco Surveys, where available, or national risk
factor surveys. Researchers from the participating
countries provided additional information on civil regis­
trations, vital statistics, and hospital discharge databases
to estimate specific case fatality rates.
Cost data
The direct medical costs (including of diagnosis,
treatment, and follow-up), from the perspective of the
public health-care systems, were estimated for each of
the tobacco-related diseases included in the model. A
common costing methodology was developed for the See Online for appendix 3
12 countries, including a microcosting or macro­costing
approach, depending on the availability and quality of
information in each country. A Microsoft Excel spread­
sheet was designed for each event, identifying health
resources and measuring quantities, utilisation rates, and
unit costs for each resource used in each event. These ad-
hoc microcosting exercises were constructed on the basis
of communications with experts, clinical guidelines,
and a review of health-care facility records. Costs of
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malignancies other than lung cancer were estimated on
the basis of lung cancer costs and an expert consensus
obtained through a modified Delphi panel method. When
sufficient local information was unavail­ able, indirect
estimates were used to approximate costs of events (eg,
for each country with information on the cost of a
particular health event, the ratio between the cost of the
health event and the country’s gross domestic product per
capita was calculated; then, for each country with missing
cost data, the average of these ratios was applied to their
gross domestic product per capita to derive the cost of
the health event). All direct medical costs were estimated
in local currency units; then consumer price indices
(published by the statistics institutes of each country)
were used for adjustments. Finally, costs were converted
to US dollars using the exchange rates of December, 2015,
published by the central banks of each country.
Model calibration and validation process
We applied the International Society for Pharmaco­
economics and Outcomes Research criteria for model
development and reporting.16 To calibrate the model,
disease specific mortality by sex and age were compared
with local statistics; predicted mortality within 10% of
the references were considered acceptable. In case of
greater deviation, risk equations were modified. External
validation was accomplished by checking the model
results against those results of other epidemiological
and clinical studies not used for equation estimation and
development.
Estimation of the smoking-related disease burden
The disease burden was estimated as the difference in
disease events, deaths, and associated costs between the
results predicted by the model for each country for
current smoking prevalence and a hypothetical cohort
of people who had never smoked for each country.
Given that the model does not directly calculate the
consequences of passive smoking and perinatal effects,
on the basis of the results of previous studies, it was
estimated that these two causes impose an additional
burden of 13·6% for men and 12% for women.17 Disease
burden results are reported for one calendar year (2015).
Estimation of the effect of taxation
The effect of price increases on the prevalence of
smoking was calculated as
Prevalence = PrevB + (Ed × ∆P × Ip × PrevB)
where PrevB is the baseline prevalence of smoking
before price increase; ∆P is the price variation as a
proportion of the baseline price; Ip is proportion of the
variation on cigarette consumption expected to affect
smoking prevalence; and Ed is the price elasticity of
demand for cigarettes. Price elasticity gives the
percentage change in quantity demanded for each
e1285
percentage increase in price (eg, a value of –0·6 means
that for every 1% increase in price the demand will
decrease by 0·6%).
Three scenarios were considered to estimate the
reduction of the health burden associated with the
reduction in cigarette consumption. (1) A short-term and
conservative scenario: different studies have estimated
that in the short-term and medium-term, approximately
half of the reduction in consumption is a consequence of
reduced prevalence of smoking and the other half is
explained by reduced consumption by people who
continue to smoke.18,19 In this scenario, we assume that
50% of the reduced consumption is a consequence of the
reduction in prevalence (Ip=0·5), leading to an increase in
the number of people who formerly smoked. (2) A
medium-term scenario: similar to the short-term scenario
but including potential health benefits associated with the
reduction in the number of cigarettes smoked by people
who continue to smoke. Considering that low-intensity
smokers have an average of 75% less excess disease risk
than high-intensity smokers when compared with people
who have never smoked (82% less for lung cancer, 57%
less for ischaemic heart disease, and 80% less for COPD),20
we assumed that a reduction in the number of cigarettes
smoked would result in a proportional reduction in the
75% of the excess risk difference between a person who
smokes and a person who formerly smoked. (3) A long-
term scenario: this is the maximum effect scenario
analysed. It is similar to the medium-term scenario, but
here Ip=0·75 and the entire reduction in prevalence results
in an increased population of people who have never
smoked, instead of one of people who formerly smoked
(further details in appendix 3, p 4).
To do a unified analysis of the three scenarios, we
developed a base-case with the results accumulated over
10 years. We assumed a linear progression from scenario
one to scenario two over 5 years and a progression to
scenario three in years 6–10. The effect of a tax increase
on revenues was estimated as
∆P
Vr = ∆c × –
pV
where Vr is the calculated variation in revenues; Δc
represents the expected variation in consumption due to
the price increase as a proportion of the baseline
consumption; ΔP represents the change in cigarette
prices as a proportion of the baseline price; and pV
represents the proportion of the price, before the price
increase, represented by taxes.
Role of the funding source
The sponsors of the study had no role in study design,
data collection, data analysis, data interpretation, or
writing of the report. The corresponding author had
full access to all the data in the study and had final
responsibility for the decision to submit for publication.
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 Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Honduras Mexico Paraguay Peru Uruguay
Population 43 416 755 10 724 705 207 847 528 17 948 141 48 228 704 4 807 850 16 144 363 8 075 060 127 017 224 6 639 123 31 376 670 3 431 555
in 2015
Smoking prevalence
Men 29·6% 20·0% 21·6% 44·2% 19·5% 20·0% 28·3% 19·6% 24·8% 23·7% 27·6% 27·7%
Women 20·9% 17·0% 13·1% 31·7% 7·4% 8·3% 9·3% 2·0% 7·8% 16·3% 12·7% 17·7%
Main direct medical costs in 2015, $*
Acute $3917 $5122 $5021 $4246 $4538 $12 756 $4703 $2080 $5219 $2882 $2830 $13 054
myocar­
dial infar­
ction
Ischaemic $2938 $3863 $1886 $2909 $1815 $7215 $4942 $1460 $3428 $2306 $1966 $12 458
event

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(not acute
myo­car­
dial infar­
c­tion)
Annual $1550 $2039 $410 $1554 $412 $1075 $1381 $631 $1335 $1345 $1245 $4042
follow-up
coronary
heart
disease
Stroke $5187 $5270 $4317 $4771 $2572 $7348 $4092 $2159 $4434 $1921 $5376 $9503
Annual $1781 $1810 $798 $1639 $755 $1625 $1015 $557 $702 $1441 $853 $3824
follow-up
stroke
Pneu­ $262 $278 $362 $253 $385 $1924 $447 $189 $1410 $865 $185 $1208
monia or
influenza
Mild $152 $63 $695 $269 $130 $219 $257 $80 $322 $384 $155 $572
COPD
(annual)
Moderate $362 $182 $1161 $594 $339 $587 $587 $200 $964 $961 $406 $1346
COPD
(annual)
Severe $5309 $3998 $4838 $6603 $4097 $8087 $5229 $2262 $9941 $2882 $4637 $3749
COPD
(annual)
Lung $21 011 $8927 $12 316 $23 392 $12 423 $22 583 $21 881 $6197 $14 845 $9991 $14 967 $39 716
cancer
1st year
Lung $27 167 $11 542 $6900 $30 246 $11 141 $25 970 $15 881 $7141 $19 195 $9991 $19 353 $45 767
cancer
2nd year
(Table 1 continues on next page)
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Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Honduras Mexico Paraguay Peru Uruguay
(Continued from previous page)
Economic parameters
Tobacco $2112 $15 $3031 $1500 $174 $63 $195 $29 $2237 $61 $73 $211
tax
revenues
in 2015,
million $†
Taxes as a 69·7% 40·4% 64·3% 81·6% 49·5% 71·8% 62·3% 38·1% 65·8% 62·7% 39·5% 65·6%
propor­
tion of
cigarette
price
GDP in $594 749 $33 000 $1 802 214 $243 999 $293 481 $54 775 $99 290 $20 979 $1 170 564 $36 164 $189 926 $53 274
2015,
million $†
GDP per $13 698 $3077 $8750 $13 737 $6085 $11 393 $6150 $2341 $9298 $5447 $6053 $15 525
capita in
2015, $‡
Price –0·30 –0·85 –0·48 –0·45 –0·78 –0·43 –0·87 –0·43 –0·45 –0·43 –0·70 –0·55
elasticity
of
demand§
Total 8·74% 6·42% 11·46% 8·30% 6·02% 7·78% 8·59% 7·71% 5·12% 7·82% 5·26% 9·01%
health
expend­
iture,
propor­
tion of
GDP‡
All costs are in 2015 US dollars. COPD=chronic obstructive pulmonary disease. GDP=gross domestic product. Exchange rate per US$ (World Bank 2015): Argentina 9·23 ARS; Bolivia 6·91 BOL; Brazil 3·33 R$; Chile 654·12 CLP; Colombia 2741·88 COL;
Costa Rica 534·56 CRC; Ecuador 1·00 US$; Honduras 21·95 HNL; Mexico 15·85 MXN; Paraguay 5204·91 PYG; Peru 3·18 PEN; Uruguay 27·33 UYU. *Cost of other cancer is shown in the appendix 3, p 1. †Sources: ministries of economy and tax revenues
agencies. ‡Source: The World Bank.21 §Sources: Argentina: Chaloupka F, et al (2014).22 Bolivia: Alcaraz VO (2006).23 Brazil: Iglesias R, et al (2007).24 Chile: Debrott Sánchez D (2006).25 Colombia: Maldonado N, et al (2016).26 Costa Rica, Honduras, and
Paraguay: Guindon GE, et al (2016).9 Ecuador: Chávez R (2016).27 Mexico: Jimenez-Ruiz JA, et al (2008).28 Peru: Gonzalez-Rozada M and Ramos-Carbajales A (2016).29 Uruguay: Carbajales AR and Curti D (2010).30

Table 1: Summary of key model parameters for each of the 12 Latin American countries analysed

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 Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Honduras Mexico Paraguay Peru Uruguay Total
Total deaths* 48 723/ 4474/ 156 217/ 19 731/ 32 088/ 1747/ 7798/ 1526/ 49 189/ 3354/ 15 715/ 4811/ 345 373/
359 196 55 274 (8%) 1 240 068 (13%) 107 545 (18%) 198 738 18 706 (9%) 57 999 (13%) 19 457 (8%) 613 123 (8%) 27 410 130 930 32 475 2 860 921
(14%) (16%) (12%) (12%) (15%) (12%)
Total disease 224 007 27 867 1 103 421 111 526 221 811 13 718 51 280 9919 308 840 22 360 95 879 20 165 2 210 720
events†
Total direct medical $3817·3 $249·7 $11 830·1 $1901·3 $1708·5 $241·5 $476·0 $56·3 $4767·7 $301·3 $796·0 $800·1 $26 946·3
cost, millions $
Total healthy years 1 072 979 113 736 (72%) 4 203 389 (72%) 495 988 (67%) 789 587 44 278 204 686 39 034 (67%) 1 237 488 88 473 380 749 104 015 8 774 402
of life lost‡ (73%) (65%) (68%) (68%) (70%) (67%) (71%) (73%) (70%)
Cardiovascular disease†
Deaths 11 127/ 696/ 34 999/ 3104/ 8160/ 431/ 1330/ 258/ 13 302/ 692/ 2029/ 768/ 76 896/
87 543 (13%) 4750 (15%) 222 550 (16%) 15 777 (20%) 50 529 (16%) 3785 (11%) 9331 (14%) 1823 (14%) 103 555 3573 (19%) 11 724 (17%) 5588 (14%) 494 755

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(13%) (16%)
Event incidence 63 162/ 2580/ 470 666/ 22 397/ 91 505/ 6495/ 4897/ 3033/ 106 369/ 9075/ 8429/ 6571/ 795 179/
261 258 12 897 (19%) 2 007 840 (23%) 64 613 (35%) 389 672 35 936 16 196 (22%) 15 009 (20%) 527 342 36 628 35 505 26 681 3 429 576
(24%) (23%) (18%) (20%) (25%) (24%) (22%) (23%)
Direct medical $1096·4/ $71·1/ $3082·5/ $438·7/ $546·9/ $97·1/ $77·0/ $23·6/ $1656·3/ $123·4/ $125·7/ $273·6/ $7612·3/
cost, millions $ $4818·8 $310·3 (23%) $13 768·9 (22%) $1283·1 (34%) $2468·6 $584·0 $293·1 (26%) $117·5 (20%) $8038·4 $525·8 $480·4 $1272·3 $33 961·2
(23%) (22%) (17%) (21%) (23%) (26%) (21%) (22%)
Stroke†
Deaths 2786/ 522/ 10 812/ 1792/ 2195/ 125/ 440/ 65/ 3740/ 270/ 1114/ 173/ 24 034/
21 960 (13%) 2896 (18%) 80 857 (13%) 9929 (18%) 17 007 (13%) 1338 (9%) 3357 (13%) 561 (12%) 39 731 (9%) 1770 (15%) 6735 (17%) 1559 (11%) 187 698
(13%)
Event incidence 14 740/ 3728/ 59 509/ 14 473/ 23 233/ 500/ 3064/ 263/ 15 273/ 1414/ 7871/ 718/ 144 786/
99 878 20 839 (18%) 385 523 (15%) 67 421 (21%) 160 477 5088 (10%) 23 671 (13%) 2175 (12%) 153 259 8433 (17%) 47 571 (17%) 5940 (12%) 980 275
(15%) (14%) (10%) (15%)
Direct medical $277·4/ $78·3/ $653·0/ $244·8/ $198·5/ $9·4/ $34·0/ $1·7/ $139·7/ $20·8/ $95·2/ $26·2/ $1779·0/
cost, millions $ $1753·7 $380·7 (21%) $3903·9 (17%) $1029·3 (24%) $1229·3 $83·1 (11%) $254·8 (14%) $13·0 (14%) $1315·3 $110·2 $531·1 $194·6 $10 799·9
(16%) (16%) (11%) (19%) (18%) (13%) (16%)
Pneumonia†
Deaths 3714/ 1002/ 10 90085 442 878/ 1102/ 75/ 543/ 75/ 2084/ 8/ 2738/ 164/ 23 283/
23 022 (16%) 5853 (17%) (13%) 4196 (21%) 6231 (18%) 588 (13%) 3665 (15%) 575 (13%) 16 304 (13%) 52 (16%) 14 874 1096 (15%) 160 054
(18%) (15%)
Event incidence 26 699/ 9894/ 121 152/ 6174/ 9440/ 754/ 5783/ 840/ 21 062/ 102/ 24 303/ 1060/ 227 309/
134 859 58 380 (17%) 705 548 (17%) 23 445 (26%) 52 954 (18%) 5339 (14%) 28 429 (20%) 6850 (12%) 143 005 625 (16%) 128 188 5573 (20%) 1 300 328
(20%) (15%) (19%) (17%)
Direct medical $7·0/ $2·7/ $43·8/ $1·5/ $3·6/ $1·5/ $2·0/ $0·1/ $29·7/ $0·1/ $4·5/ $1·4/ $97·9/
cost, millions $ $35·4 (20%) $16·2 (17%) $255·2 (17%) $5·9 (26%) $20·4 (18%) $10·3 (20%) $12·7 (20%) $1·3 (12%) $201·6 (15%) $0·5 (16%) $23·7 (19%) $6·7 (20%) $590·3
(17%)
COPD†
Deaths 9259/ 932/ 31 120/ 5526/ 8028/ 432/ 2467/ 461/ 12 635/ 907/ 3933/ 1030/ 76 730/
12 367 (75%) 1293 (72%) 41 924 (74%) 6750 (82%) 10 425 (77%) 672 (64%) 3223 (77%) 731 (63%) 18 164 (70%) 1174 (77%) 5065 (78%) 1354 (76%) 103 142
(74%)
Event incidence 96 569/ 10 349/ 378 594/ 60 470/ 85 120/ 5212/ 35 528/ 5141/ 147 449/ 10 385/ 49 516/ 9558/ 893 891/
142 818 16 863 (61%) 557 944 (68%) 79 636 (76%) 124 833 9150 (57%) 47 501 (75%) 9621 (53%) 238 741 14 887 69 728 14 029 1 325 751
(68%) (68%) (62%) (70%) (71%) (68%) (67%)
Direct medical $569·0/ $35·3/ $4801·8/ $495·6/ $405·1/ $40·2/ $206·0/ $13·5/ $1617·7/ $84·5/ $234·9/ $136·3/ $8640·0/
cost, millions $ $767·2 (74%) $48·3 (73%) $6748·6 (71%) $612·7 (81%) $531·6 (76%) $63·2 (64%) $270·8 (74%) $21·8 (62%) $2364·7 $114·5 $305·3 $180·3 $12 028·9
(68%) (84%) (77%) (85%) (72%)
(Table 2 continues on next page)
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Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Honduras Mexico Paraguay Peru Uruguay Total
(Continued from previous page)
Lung cancer†
Deaths 9416/ 292/ 23 762/ 2774/ 4401/ 188/ 859/ 205/ 5838/ 607/ 1889/ 1183/ 51 414/
11 488 (82%) 378 (77%) 30 519 (78%) 3212 (86%) 5483 (80%) 263 (71%) 1159 (74%) 329 (62%) 8007 (73%) 728 (83%) 2350 (80%) 1389 (85%) 65 306
(79%)
Incidence 10 876/ 313/ 26 850/ 3026/ 4723/ 269/ 887/ 228/ 6375/ 644/ 2031/ 1285/ 57 507/
13 256 (82%) 405 (77%) 34 313 (78%) 3515 (86%) 5869 (80%) 384 (70%) 1196 (74%) 366 (62%) 8733 (73%) 772 (83%) 2524 (80%) 1511 (85%) 72 845
(79%)
Direct medical $770·0/ $8·9/ $686·3/ $218·9/ $146·2/ $25·3/ $38·0/ $4·2/ $303·0/ $17·3/ $97·4/ $155·7/ $2471·3/
cost, millions $ $937·1 $11·5 (78%) $871·2 (79%) $256·0 (86%) $180·5 (81%) $36·2 (70%) $51·7 (76%) $6·8 (62%) $414·4 (73%) $20·8 (74%) $121·0 $177·3 $3084·5
(82%) (81%) (73%) (80%)
Other cancers†
Deaths 6815/ 516/ 26 651/ 3388/ 4511/ 296/ 1261/ 287/ 5931/ 484/ 2204/ 940/ 53 284/
21 689 (31%) 2574 (20%) 79 405 (33%) 9842 (34%) 16 769 (27%) 1420 (21%) 5456 (23%) 1833 (16%) 28 206 (21%) 1669 (29%) 9253 (24%) 2572 (36%) 180 688
(29%)
Incidence 11 961/ 1003/ 46 650/ 4986/ 7790/ 486/ 1832/ 414/ 11 461/ 766/ 3385/ 1314/ 92 048/
36 993 (32%) 4631 (21%) 134 242 (35%) 14 328 (35%) 27 723 (28%) 2290 (21%) 7736 (24%) 2604 (16%) 50 628 (22%) 2585 (30%) 14 921 3676 (36%) 302 359
(22%) (30%)
Direct medical $658·4/ $24·7/ $1201·7/ $283·0/ $211·6/ $40·2/ $64·0/ $6·7/ $472·6/ $20·6/ $146·7/ $114·7/ $3244·9/
cost, millions $ $1932·0 $115·8 (21%) $3498·2 (35%) $846·8 (37%) $783·8 (27%) $188·0 $271·5 (25%) $42·6 (16%) $1837·0 $73·3 (31%) $601·6 $317·2 $10 707·9
(32%) (21%) (22%) (24%) (36%) (30%)
Second-hand smoking and other causes†
Deaths 5605 515 17 972 2270 3692 201 (100%) 897 (100%) 176 5659 386 1808 553 39 734
(100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%)
Direct medical $439·1 $28·7 $1361·0 $218·8 $196·6 $27·8 $55·0 $6·5 $548·5 $34·6 $91·6 $92·2 $3100·4
cost, millions $ (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%)
Data are n/N (%) or cost/total cost (%) except where otherwise stated. All costs are in 2015 US dollars. COPD=chronic obstructive pulmonary disease. *Proportions in parentheses are deaths attributable to tobacco as a proportion of total deaths in the
population 35 years and older. †Proportions in parentheses are deaths, events, or costs attributable to tobacco as a proportion of total deaths, events, or costs in each condition that are attributable to smoking (eg, deaths caused by cardiovascular
disease: 11 127 (13%) means that there are 11 127 deaths from cardiovascular disease attributable to smoking, which represent 13% of the total deaths caused by that condition). ‡Years of life lost due to premature mortality and quality of life lost
attributable to tobacco; the proportion that is attributable to premature mortality is indicated within the parentheses.

Table 2: Annual burden of mortality, disease incidence, and direct medical costs attributable to tobacco, by cause and country for 2015

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Results the resources allocated to treat smoking-attrib­ utable

Epidemiological and economic data were obtained diseases; we estimated that tax revenues from cigarette
for each country for Jan 1 to Dec 31, 2015. The main sales cover 36·0% of health expenditures attrib­utable to
parameters included in the model are shown in table 1 smoking across all 12 countries. We estimated that Bolivia
and in appendix 3 (p 1). After the model was calibrated, recovers 6·0% of the expenses and that Chile, with the
the mean rate of each disease-specific mortality predicted highest tobacco taxes in the region, recovers 78·9% of the
by the model was within 10% of the corresponding health costs attributable to tobacco (table 3).
mortality reported by national statistics in each country We estimated that a 50% increase in the price of
(correlation between the observed and expected results cigarettes through taxes in the 12 Latin American
yielded R² values ranging from 0·700 to 0·999). External countries analysed could produce substantial health and
validation also showed a good correlation between the economic benefits in the next 10 years. In these
results predicted by the model and those observed in 12 countries, we estimated that this price increase would
epidemiological studies. The results of the calibration lead to the aversion of 314 314 deaths, and approximately
and validation process in Argentina are shown in 1·27 million cardiovascular, cerebrovascular, and cancer
appendix 3 (p 5). events (table 4). We also estimated that this tax policy
In total, in the 12 countries included in this study, would result in gaining almost 8·67 million healthy life
smoking is estimated to cause 345 373 (12%) of the total years by averting premature death and disability. Approxi­
2 860 921 adult deaths, 2·21 million disease events, mately $23·4 billion would be saved in health-care costs,
8 774 402 healthy years of life lost because of premature and tax revenues could increase by approximately
mortality and disability, and US$26·9 billion in direct $35·1 billion, resulting in a total estimated economic
medical costs every year (table 2). We estimated that benefit of $58·6 billion.
cancer, COPD, and cardiovascular disease attributable to The health and economic effects of a price increase of
smoking caused the largest burden in terms of both lost tobacco in each country depend on several factors, such
health and medical costs. Tobacco use was responsible as the prevalence of smoking, the current level of taxes,
for an estimated 51 414 (79%) of 65 306 deaths and the elasticity of demand, and health-care costs. The figure
$2471·3 million (80%) of $3084·5 million in medical shows the expected health and economic gains from a
costs due to lung cancer, 76 730 (74%) of 103 142 deaths 50% increase in tobacco price in each country over
and $8640·0 million (72%) of $12 028·9 million 10 years. The health benefits are expressed as deaths
in medical costs due to COPD, and 76 896 (16%) of avoided as a proportion of the current number of deaths
494 755 deaths and $7612·3 million (22%) of that are attributable to smoking in each country; the
$33 961·2 million in medical costs due to cardiovascular economic benefits due to a reduction of health-care costs
disease (table 2). and increased tax collection are expressed as a proportion
In Chile, the country with the highest smoking
prevalence, 19 731 (18%) of 107 545 deaths among adults Smoking-attributable annual direct medical costs Proportion of direct
were estimated to be related to smoking (the largest medical costs recovered
proportion of all of the 12 countries); the direct medical through tobacco taxes
cost of smoking was estimated to be about US$1·9 billion. Total costs, $ As a proportion of As a proportion
Brazil, the country with the largest population in the total health of GDP
expenditure
group, showed the largest estimated absolute number
of deaths and costs attributable to tobacco with Argentina $3 817 334 778 7·3% 0·6% 55·3%
156 217 annual deaths and a cost of approximately Bolivia $249 794 501 11·8% 0·8% 6·0%
$11·8 billion, followed by Mexico with 49 189 smoking- Brazil $11 830 140 911 5·7% 0·7% 25·6%
related deaths and approximately $4·8 billion in costs. Chile $1 901 333 725 9·4% 0·8% 78·9%
COPD was the single disease that caused the highest Colombia $1 708 544 794 9·7% 0·6% 10·2%
estimated proportion of smoking-related deaths (table 2). Costa Rica $241 569 268 5·7% 0·4% 26·1%
In the 12 countries combined, COPD was estimated Ecuador $476 043 817 5·6% 0·5% 41·0%
to cause more than 76 000 smoking-related deaths and Honduras $56 355 353 3·5% 0·3% 51·5%
approximately $8·7 billion in costs. All cancers com­ Mexico $4 767 757 221 8·0% 0·4% 46·9%
bined, including lung cancer, accounted for an estimated Paraguay $301 307 227 10·7% 0·8% 20·2%
104 000 deaths and $5·7 billion in costs in all countries. Peru $796 045 581 8·0% 0·4% 9·2%
Health-care costs attributable to smoking repre­ Uruguay $800 146 359 16·7% 1·5% 26·4%
sented an estimated 6·9% of the health budgets of these All 12 countries $26 946 373 535 6·9% 0·6% 36·0%
12 countries, ranging from 3·5% in Honduras to All costs are in 2015 US dollars. GDP, total health expenditure as a proportion of GDP, and total tobacco tax revenue for
16·7% in Uruguay; these health-care costs represented a each country are shown in table 1. GDP=gross domestic product.
mean of 0·6% of gross domestic product, ranging
Table 3: Proportion of total health expenditures and GDP represented by smoking-attributable direct
from 0·3% in Honduras to 1·5% in Uruguay. None of
medical costs and proportion recovered through tobacco taxes in 2015
the countries recover through tobacco taxes the total of

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Health effect Economic effect

Deaths Healthy life- Coronary heart Stroke events Cancer events Health-care Increased tax Total economic
averted years lost disease events averted averted costs savings, revenue, benefit,
averted* averted millions $ millions $ millions $
Argentina 27 469 660 323 43 505 15 761 12 691 $2266 $9738 $12 004
Bolivia 10 868 279 060 6330 11 960 3141 $655 $43 $699
Brazil 136 482 4 076 353 507 451 100 365 64 383 $9761 $10 640 $20 401
Chile 20 502 536 701 25 794 23 996 8273 $2052 $3749 $5801
Colombia 45 049 1 173 703 142 162 62 967 17 401 $2554 $393 $2948
Costa Rica 1698 42 592 6847 787 726 $237 $209 $446
Ecuador 4946 133 607 3321 4221 1726 $294 $801 $1094
Honduras 1306 33 692 2992 416 587 $50 $238 $289
Mexico 38 358 1 047 689 99 066 24 113 14 418 $3502 $8138 $11 640
Paraguay 2507 67 537 7383 2112 1056 $221 $252 $473
Peru 20 588 505 153 12 482 19 343 7433 $1067 $344 $1411
Uruguay 4541 108 751 7485 1345 2652 $788 $586 $1374
Total 314 314 8 665 161 864 818 267 386 134 487 $23 448 $35 131 $58 580
All economic effects are in 2015 US dollars. *Healthy life-years lost averted are those that would have been lost because of premature mortality or quality of life losses.

Table 4: Projected 10-year accumulated health and economic effect of a 50% price increase of cigarettes through taxes

of the country’s gross domestic product. In the long
term, a 50% price increase of tobacco could prevent
between 7·6% (Argentina) and 32·4% (Bolivia) of all
deaths currently attributable to smoking per year and
could produce economic gains equivalent to 0·09% of
gross domestic product in Peru, to up to 0·31% of gross
domestic product in Uruguay. In some countries, these
economic benefits would be produced mainly by avoided
health-care costs (eg, in Bolivia, Colombia, and Peru) and
in others, by increased tax collection (eg, in Argentina,
Honduras, and Mexico).
Discussion
To the best of our knowledge, this is the first study to
analyse the disease burden of smoking in Latin America
with an economic model developed in the region. Our
findings show that smoking represents a substantial
health and economic burden in 12 countries in Latin
America, with more than 345 000 deaths, 2·2 million
disease events, and $26·9 billion in medical costs that
are estimated to be directly attributable to tobacco every
year. Tax collections from tobacco products are barely
enough to cover a third of these costs.
Taxation can be an effective strategy to reduce smoking,
improve population health, and reduce health-care costs.
According to our estimations, an increase of just 50% in
the price of cigarettes through taxation, which is feasible
in the region given the low prevailing prices, would pre­
vent more than 300 000 deaths and more than 1 million
cardiovascular events, strokes, and cancers, and would
reduce health-care costs and increase tax revenues, leading
to a total economic benefit of $58·6 billion over 10 years.
Our findings are consistent with previous studies in
terms of both the estimation of the overall burden of
tobacco and the potential reduction of this burden
through taxation. Smoking is a leading risk factor for
early death and disability in more than 100 countries and
is responsible for 11·5% of deaths and 6·0% of disability-
adjusted life-years worldwide.31 Previous studies have
estimated that health-care expenditures due to smoking-
attributable diseases totalled 5·7% of global health
expenditures in 2012.4 It has been suggested that if
cigarette prices increased 50% worldwide, approximately
20 million people could avoid poverty, millions of
premature deaths could be prevented, and extra tobacco
revenue could partly finance health care.32
A simulation model applied to 181 countries showed
that a 43% increase in the retail price of cigarettes
through taxes would lead to 15 million fewer smoking-
attributable deaths among the adults who were alive
in 2014, and cigarette excise revenue would increase
by 47%.33 In the EU, if all countries charged higher taxes,
consumption of tobacco would be reduced, and revenue
would be increased by an average of 6·76% with a
10% price increase.34
Previous studies have analysed the potential effect of
a price increase on cigarette consumption in Latin
America. In Colombia, one such study estimated that
a 50% increase in the price of cigarettes, bringing
it closer to the regional average, could result in a
31% decrease in consumption.26 In Mexico, the
SimSmoke model esti­mated that increasing excise taxes
to 70% of the price could reduce the smoking prevalence
by 16%, and in Argentina, it was estimated that an
80% price increase would reduce smoking prevalence
by 20% within 30 years.35,36
A limitation of our study is that, although it offers a
robust estimate of the health and financial burden of
smoking using the best available information in each
country and applying a uniform and replicable method,

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Additional tax revenues Health-care costs averted Deaths averted

Argentina Bolivia Brazil
0·35 35 0·35 35 0·35 35

Proportion of deaths averted (%)

Proportion of deaths averted (%)

Proportion of deaths averted (%)

0·30 30 0·30 30 0·30 30
Economic gains (%)

Economic gains (%)

Economic gains (%)

0·25 25 0·25 25 0·25 25
0·20 20 0·20 20 0·20 20
0·15 15 0·15 15 0·15 15
0·10 10 0·10 10 0·10 10
0·05 5 0·05 5 0·05 5
0 0 0 0 0 0

Chile Colombia Costa Rica

0·35 35 0·35 35 0·35 35
Proportion of deaths averted (%)

Proportion of deaths averted (%)

Proportion of deaths averted (%)

0·30 30 0·30 30 0·30 30
Economic gains (%)

Economic gains (%)

Economic gains (%)

0·25 25 0·25 25 0·25 25
0·20 20 0·20 20 0·20 20
0·15 15 0·15 15 0·15 15
0·10 10 0·10 10 0·10 10
0·05 5 0·05 5 0·05 5
0 0 0 0 0 0

Ecuador Honduras Mexico

0·35 35 0·35 35 0·35 35
Proportion of deaths averted (%)

Proportion of deaths averted (%)

Proportion of deaths averted (%)

0·30 30 0·30 30 0·30 30
Economic gains (%)

Economic gains (%)

Economic gains (%)

0·25 25 0·25 25 0·25 25
0·20 20 0·20 20 0·20 20
0·15 15 0·15 15 0·15 15
0·10 10 0·10 10 0·10 10
0·05 5 0·05 5 0·05 5
0 0 0 0 0 0

Paraguay Peru Uruguay

0·35 35 0·35 35 0·35 35
Proportion of deaths averted (%)

Proportion of deaths averted (%)

Proportion of deaths averted (%)

0·30 30 0·30 30 0·30 30
Economic gains (%)

Economic gains (%)

Economic gains (%)

0·25 25 0·25 25 0·25 25

0·20 20 0·20 20 0·20 20
0·15 15 0·15 15 0·15 15
0·10 10 0·10 10 0·10 10
0·05 5 0·05 5 0·05 5
0 0 0 0 0 0
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Years after price increase Years after price increase Years after price increase

Figure: Estimated proportion of deaths averted and economic benefits during the 10 years after a 50% increase in the price of cigarettes in 12 Latin American countries
In each country, deaths averted are expressed as a proportion of current total tobacco-attributable deaths. Economic gains (due to increased tax revenues and reduction of direct medical costs) are
expressed as a proportion of the GDP of each country. GDP=gross domestic product.

our results are highly dependent on the quality of changes in health-care costs). Despite these limitations,
information in each country. The availability and both the burden attributable to smoking and the benefits
quality of epidemiological and cost information in Latin of tobacco tax increases evidenced by our study are
America is very variable and, in some countries, even probably conservative estimates. Our analysis considered
basic data such as mortality statistics can be imprecise. only the direct medical costs generated by tobacco
Similar to all model-based studies, there is also consumption, which are only a portion of the total
uncertainty around many of the model’s assumptions. financial burden imposed by smoking on countries.
For example, many changes could happen in the future Several studies have shown that the financial burden of
that would affect the 10-year benefit estimate (eg, changes smoking could be double or triple the estimates based on
in smoking behaviours, emergence of new treatments, direct medical costs if the cost of lost productivity and

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other social costs are also considered.4,37,38 Results
obtained using our model showed that in Brazil, when a
conser­vative estimate of the productivity losses caused by
tobacco was included in the analysis, the estimate of the
economic burden of smoking increased by 50%, from
39·4 billion to 59·1 billion Brazilian Reais per year.39
Another important limitation is that our model did not
include the effects of passive smoking, perinatal effects,
or other effects (such as losses from fires), although we
did include an estimation of the effect of these factors
based on estimates from other studies. For all these
reasons, although our study is more comprehensive than
most of the analyses that had been done so far in Latin
America, our estimates of the potential benefits of higher
tobacco taxes are probably an underestimation.
Although taxation could be the best strategy to curb the
use of tobacco, many countries are lagging behind the
level of taxation recommended by WHO. Cigarettes
remain affordable, and prices are manipulated by the
tobacco industry to ameliorate the effects of excise tax on
smokers. Our results show that tobacco tax increases
could successfully avert deaths and disability, as well as
substantially reduce spending on health care, resulting
in large net economic benefits in these 12 Latin American
countries.
Contributors
AP-R, AB, and AA planned the study. AP-R, AB, and AP developed the
method. BR, LMR-S, MP, MC-R, EPT, DIO, LH, CLM, BSdM-J, VG-R,
CDLP, MdPN-B, and SAV obtained data. AP-R, AA, AP, BR, JC, SAV, FA,
and AB did the analyses. All authors contributed to the interpretation of
the data. AP-R, AA, AB, and JR drafted the manuscript. AP-R, AA, AB,
and JR critically reviewed the manuscript. All authors reviewed the final
version.
Declaration of interests
We declare no competing interests.
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37 Eriksen M, Mackay J, Islami Gomeshtapeh F, Drope J. The tobacco
atlas, 5th edn. Atlanta, GA: The American Cancer Society, 2015.
38 Lightwood J, Lapsley H, Novotny T. Estimating the costs of tobacco
use. In: Jha P, Chaloupka F, eds. Tobacco control in developing
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39 Pinto M, Bardach A, Palacios A, et al. Burden of smoking in Brazil
and potential benefit of increasing taxes on cigarettes for the
economy and for reducing morbidity and mortality.
Cad Saude Publica 2019; 35: e00129118.
e1294
 Original research
1
Graduate Program of
Economics, Catholic University
of Brasilia, Brasilia, DF, Brazil
2
School of Public Policy and
Government, Getulio Vargas
Foundation, Brasilia, DF, Brazil
Correspondence to
Professor Jose Angelo Divino;
​jangelo@​p.​ucb.​br
Received 27 May 2021
Accepted 11 September 2021
Published Online First
4 October 2021
© Author(s) (or their
employer(s)) 2022. No
commercial re-­use. See rights
and permissions. Published
by BMJ.
To cite: Divino JA, Ehrl P,
Candido O, et al. Tob Control
2022;31:s74–s79.
s74
Extended cost–benefit analysis of tobacco taxation
in Brazil
Jose Angelo Divino ‍ ‍ ,1 Philipp Ehrl ‍ ‍ ,1 Osvaldo Candido ‍ ‍ ,1
Marcos Aurelio Pereira Valadao ‍ ‍ 2
ABSTRACT
Background Brazil has experienced a persistent and
substantial reduction in the prevalence of smoking in
the population since 2006 due to increased taxes on
tobacco and other tobacco control policies. Despite
the effectiveness of these measures, however, the
socioeconomic costs of smoking are still very high.
Tobacco taxation in Brazil plays an important role among
the measures adopted to curb tobacco use.
Methods The study combines data from the National
Household Sample Survey of 2008 and the National
Health Survey of 2013 and applies cross-­section, pooled,
and probit estimations, to estimate price elasticities of
tobacco consumption by distinct population cohorts. The
paper presents a comprehensive cost–benefit analysis
resulting from a one-­time tax increase on manufactured
cigarettes using estimated conditional price elasticity
of cigarette consumption and probability of smoking by
income and age quartiles.
Findings Each 10% price increase (BRL 0.54), due to higher
tobacco taxes, reduces cigarette consumption by about 5%,
and for poor smokers, it would lead to net income gains by
about BRL 39.00 per month (in 2019 values). The highest
net income effects were observed for the younger, aged
between 15 and 29 years, and for middle-­aged individuals,
between 40 and 59 years old. Higher tobacco taxes lead to
lower medical expenses on tobacco-­related diseases and a
longer, healthier and more productive life. Most importantly,
this policy is progressive, as its economic effects are stronger
for the poorer than for the richer according to the income
quartiles.
Conclusions A tax increase that rises cigarette prices
generates significant social benefits by reducing tobacco
spending and medical expenses on tobacco-­related
diseases and raising future years of life and net income.
The total benefits for the individual and the society go
way beyond the public finance improvement.
INTRODUCTION
Brazil is usually referred to as a successful case
of application of tobacco control policies, having
experienced a persistent and substantial reduction
in the prevalence of smoking in both total popu-
lation and distinct cohorts since 2006. According
to data from Risk Factor Surveillance and Protec-
tion for Chronic Diseases by Telephone Survey
(VIGITEL), the percentage of smoking adults in
the population decreased from 15.7% in 2006 to
10.1% in 2017. The country’s adoption of the
WHO Framework Convention on Tobacco Control
Convention and subsequent ratification by the
Brazilian National Congress in 2005 coupled with
a rigorous tax policy on cigarette production are
Divino JA, et al. Tob Control 2022;31:s74–s79. doi:10.1136/tobaccocontrol-2021-056806
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considered milestones for this sharp decrease in
smoking prevalence.
Two major mechanisms were employed to discourage
smoking. First, tax policy was used to increase the
price of cigarettes, and second, legal restrictions were
imposed to make smoking socially discouraged. This
strategy was effective because it raised the monetary
costs of smoking by raising taxes on the price of ciga-
rettes and increased the inconvenience of smoking
by imposing several legal restrictions on smoking
behaviour, such as forbidding smoking in public places,
restricting cigarette marketing and sales, advertising
against smoking and others.
Despite the effectiveness of these tobacco control
policies, the socioeconomic costs of smoking are still
very high in Brazil. A recent study1 reports that ciga-
rette consumption accounted for about 150 000 deaths
in Brazil in 2015. Premature deaths that reduce the
working life of smokers and healthcare costs for treat-
ment of tobacco-­related illness represent some of the
major economic costs of tobacco consumption. The
copyright.
same study estimates total cost to society amounts to
be about 1% of gross domestic product.
The objective of this study is to provide a
comprehensive cost–benefit analysis resulting from
tobacco taxation in Brazil using estimated price
elasticities of cigarette consumption by different
cohorts of the population. This analysis is essential
to understanding the smoking behaviour of individ-
uals and to evaluate the associated economic costs
of smoking to the Brazilian society.
There are at least three channels by which a
tobacco tax increase could affect social welfare.2
The first channel is that higher cigarette prices
due to higher tobacco taxation reduces cigarette
consumption and prevents smoking initiation.
The second channel comes from the reduction in
healthcare expenses associated with the averted
treatment costs of tobacco-­related diseases and the
third one is the increase in income due to gains
in years of employment derived from an exten-
sion in life expectancy. (One may consider other
effects, such as reducing secondhand smoking
and reducing adverse birth outcomes for instance.
Therefore, the methodological choice might under-
estimate the benefits of taxation as it will not be
able to capture all these channels.) Based on two
2017 and 2018 studies,2 3 we estimate the impact
of these channels by estimating price elasticity of
tobacco and calculating the welfare gains among
various income groups resulting from a tobacco
tax increase that raises cigarette prices and lowers
tobacco consumption.
 Original research

We apply a similar methodology to access the welfare gains
resulting from a tax increase in manufactured cigarettes for Brazil
by using household survey data from 2008 and 2013. We esti-
mate price elasticity of cigarette consumption by gender, income
quartiles and age groups. The estimated elasticities are used
to implement an extended cost–benefit analysis of increasing
tobacco taxes on aggregate welfare by income quartiles and age
groups.
The extended cost–benefit analysis considers an increase of
10% in the price of cigarettes resulting from higher taxes on
manufactured cigarettes. The analysis uses the estimated price
elasticities of demand to simulate the effect of the price increase
on tobacco spending, medical expenses and wage income due to
the gain in future years of employment. The positive net income
effect of the decrease in cigarette consumption due to a 10%
increase in cigarette taxes reaches 4.24% and 5.13% in the first
and second income quartiles, respectively. These gains in income
come from combining the increase in cigarette expenses due to
the higher price, reduction in medial expense with the decrease
in smoking and gain in future years of working life due to health
improvement. These gains decrease as the quartiles of income
increase, indicating the progressiveness of this tax policy.
Considering the net income effect by age group, there are
similar results. The highest income effects are for the young
(15–29 years old) and middle aged (40–59 years old). This is
because younger people have lower income and thus a higher
benefit from future years of working life by reducing or quitting
smoking. Middle-­aged people also have high net income effects
because smoking-­related illnesses and disease usually appear at
this age and result in elevated medical expenses for treatment.
The paper is organised as follows. The next section discusses
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Data and smoking behaviour
In order to describe the smoking behaviour of the Brazilian
population and to estimate the sensitivity of cigarette consump-
tion with respect to cigarette prices, this study combined two
exclusive individual surveys: the National Household Sample
Survey (PNAD) of 2008 and the National Health Survey (PNS)
of 2013. Both are repeated surveys for distinct purposes, but
in the two selected years, their questionnaires include a special
section on smoking behaviour. We select those relevant items
that are identical in both questionnaires to guarantee compara-
bility between the 2 years and uniformity of analysis. The PNAD
and the PNS are representative surveys, which are organised
by the Brazilian Institute for Geography and Statistics under
the same sampling scheme. Both have a household and an indi-
vidual component. This study focuses on the latter questionnaire
because smoking behaviour is essentially individual. The use of
the provided sample weights makes the statistics representative
of the entire population.4 5 Monetary variables refer to the base
year of 2013.
Table 1 reports the proportion of regularly smoking individ-
uals across income quartiles and five age groups in 2008 and
2013. (Note that, according to the nature of our data, income
and the income quartiles refer to the total income that the inter-
viewed individual received per month.) The data confirm that,
independent of the characteristics, there is an overall tendency
to reduce smoking. Moreover, one observes that the propensity
of smoking declines monotonically with income and increases
with age, except for individuals aged 60 years and above.
It also indicates how many cigarettes the respondent smoke
per day and which price the smokers paid for a pack of ciga-

the data set and smoking behaviour of the Brazilian popula-
tion. The third section describes the methodology used in the
price elasticity estimation and cost–benefit analysis. The fourth
section reports and discusses the extended cost–benefit anal-
ysis resulting from an increase in cigarette taxes. Finally, the
fifth section is dedicated to the concluding remarks and policy
recommendations.
copyright.
rettes in their last purchase. In contrast to the extensive margin
(or smoking prevalence), individuals with high incomes tend
to smoke more cigarettes per day and tend to consume more
expensive brands. While individuals below the age of 30 years
and above 60 years smoke less than 13 cigarettes per day, the
number is as high as 16 in group of people aged between 50
and 59 years. Notwithstanding, the intensive margin of smoking

Table 1 Smoking behaviour by cohort and income quartiles 2008 and 2013
Age group (years) 15–29 30–39 40–49 50–59 60+ Year
 Share of smokers (%) 14.1 18.4 22.8 24.0 14.5 2008
 Share of smokers (%) 11.8 13.1 17.4 20.5 12.4 2013
 # of cigarettes (units) 12.4 13.9 14.5 16.0 12.9 2008
 # of cigarettes (units) 11.7 12.6 13.6 13.3 14.4 2013
 Average price per cigarette pack (BRL) 2.5 2.4 2.3 2.4 2.3 2008
 Average price per cigarette pack (BRL) 4.2 4.2 4.2 4.2 3.9 2013
Income share allocated to cigarettes (%) 11.2 10.7 10.0 9.8 6.6 2008
Income share allocated to cigarettes (%) 11.0 9.9 11.7 9.1 8.3 2013
Income quartile Quartile 1 Quartile 2 Quartile 3 Quartile 4 year
 Share of smokers (%) 19.9 19.8 19.0 14.9 2008
 Share of smokers (%) 16.3 16.4 14.2 12.2 2013
 # of cigarettes (units) 12.6 13.1 14.3 16.1 2008
 # of cigarettes (units) 12.5 12.1 13.3 14.3 2013
 Average price per cigarette pack (BRL) 2.2 2.3 2.4 2.8 2008
 Average price per cigarette pack (BRL) 3.6 3.9 4.2 4.9 2013
 Income share allocated to cigarettes (%) 18.3 9.1 6.7 3.6 2008
 Income share allocated to cigarettes (%) 19.1 8.8 6.9 3.6 2013
The table shows the share of individuals aged 15 years and above who smoke cigarettes according to the PNAD and PNS survey in 2008 and 2013, respectively. For those
individuals who smoke, the average price paid per 20 cigarette pack and the number of cigarettes smoked on average in each age or income group are also reported. The
calculations use the survey weights to make the numbers representative for the entire population.

Divino JA, et al. Tob Control 2022;31:s74–s79. doi:10.1136/tobaccocontrol-2021-056806 s75

 Original research

(smoking intensity) also clearly is decreasing over time in line
with the rising consumer price of cigarettes.
Notice that cigarette prices in the different population groups
increased by 50% and more, while the general price level
increased by 28.5% as measured by the official consumer price
index during the same period. The differences between cigarette
prices are reasonable but still lower than those observed in a
study on Moldova,6 where the average prices between the first
and last income decile differ by a factor of more than two.
METHODOLOGY
Price elasticity of cigarette consumption
One key parameter in this cost–benefit analysis is the price elas-
ticity of cigarette consumption. Its value indicates how individ-
uals adjust their consumption to price changes. Specifically, the
price elasticity (ε) measures how many percentage points the
amount of cigarette consumption will decrease if the final price
of cigarettes is increased by 1%. To account for the potentially
different effects of a tobacco tax increase over the income distri-
bution, price elasticities are estimated for each income quartile.
Therefore, the results can capture whether the tax change is
progressive or regressive, that is, whether rich individuals are
relatively more or less affected. The conditional price elasticities
are derived from the following estimation:
∑ ∆Iyll = εq × ∆P × ρwy,q
lnQidt = α + εd lnPidt .Idt + βXidt + eidt
(1)
‍ d ‍
where Qidt is the number of cigarettes smoked per day by indi-
vidual i in income quartile d and year t, Pidt is the price that
individual i actually paid per cigarette, Idt is a binary variable that
indicates to which income quartile the individual belongs and
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Extended cost–benefit analysis
The cost–benefit analysis presented here is based on tobacco
literature,2 6 the main hypothesis being that the change in tobacco
consumption has a direct impact on household tobacco expen-
ditures and on medical expenditures and productivity costs. The
net income effect due to a tobacco price change can be decom-
posed into three effects: (1) change in tobacco expenditure; (2)
change in medical expenses and (3) change in income related to
years of productive life lost.
The change in cigarette expenditures (‍∆CE‍) is given by
(( )( ) )
‍ ∆CEq = 1 + ∆P 1 + εq × ∆P − 1 × ρc,q ‍ (3)
where ‍ ∆P ‍is the change in cigarette price, ‍εq ‍ is the cigarette
price elasticity for quartile ‍q ‍and ‍ρc,q ‍is the cigarette expenditure
proportional to total expenditures (per cent) for quartile q.
The change in medical expenditures (‍∆ME‍) can be obtained
by
∆MEq = εq × ∆P × ρm,q ‍
‍ (4)
where ‍ρm,q ‍is the medical treatment expenditures (with tobacco
related diseases) to total expenditures ratio for quartile ‍q .‍ That
is, the weight of medical costs added to the total household
expenditures in a given period of time.
Finally, the change in income due to ‍yll ‍ − years of produc-
tivity life lost − (‍∆Iyll )‍ is given by
yll×s (5)
ωq = wyq × ωyll , wyq = nq q
‍ ‍
where the working years, ‍wyq ,‍ is the ‍yll ‍ distributed across
quantile ‍q ‍proportionally to the number of smokers ‍sq /nq ;‍ ‍ωyll ‍is
the monetary cost of 1 year of life cost, thus ‍ωq ‍is the monetary
cost of ‍wyq ‍ and ‍ρwy,q ‍ is the working years cost to total expendi-

copyright.
the vector Xidt includes control variables for age, education, years
tures ratio for quartile ‍q .‍ The rationale of equation (5) is that
of smoking, income, gender and federal state fixed effects. eidt is
a reduction in tobacco consumption, due to a price increase,
the random error term of the regression. In addition to equation
diminishes the years of productive life lost (ie, less premature
(1), we also estimate a modified model where the interaction
death and less people living with poor quality of life). Since
with income quartiles is substituted by age cohorts.
people potentially will live more years (or live years with a better
Following WHO Handbook,7 we estimate the unconditional
quality of life), they will also have an income gain.
price elasticity related to the quantity of smokers from the
following probit model:
( ) ( ) RESULTS
‍ Pr Sist = ϕ γ1 Pst + δXist ‍ (2) The overall price elasticities by cohort and income quartiles
The dependent variable is an indicator whether individual i used to calculate the components of the net income effects are
is a smoker or not, and the other variables are the same as in reported in table 2. The estimated elasticity values are highly
equation (1). Combining both equations (1) and (2) to a two-­ significant according to the 95% CI, although the statistical
part model gives the overall effect of how a price increase would significance cannot be confirmed for the differences between
affect total cigarette consumption. The total price elasticity thus cohorts within a given population group.
reflects adjustments along two dimensions: (1) the consumption From table 2, one observes little differences across age cohorts
quantity (smoking intensity), that is, the intensive margin; and and income quartiles. Specifically, for the majority of Brazilians,
(2) the smoking prevalence, that is, extensive margin.
Since the product is highly similar but prices between different
brands vary quite substantially, consumers may adjust to price
changes by switching to a cheaper brand. To deal with a possible Table 2 Smoking overall price elasticities by cohort and income
endogeneity bias and the problem of misreporting the price of quartile
the individuals’ last purchase, leading to measurement error Age group
and the well-­known attenuation bias in the coefficients towards Price elasticity 15–29 30–39 40–49 50–59 60+
zero, reported prices are substituted with average prices in each Lower bound −0.66 −0.66 −0.62 −0.62 −0.74
federal state. These average prices are calculated as the average Estimated −0.45 −0.45 −0.41 −0.39 −0.40
of self-­reported prices across smokers within each federal state. Upper bound −0.20 −0.20 −0.16 −0.12 0.02
Prices differ substantially between federal states because a part Income quartile
of the tobacco tax rate is state specific and because distribution Price elasticity Quartile 1 Quartile 2 Quartile 3 Quartile 4
and transport costs to the interior of the country are quite high
Lower bound −0.68 −0.69 −0.71 −0.75
due to poor infrastructure.8 These average prices can be seen as
Estimated −0.47 −0.49 −0.52 −0.55
exogenous to the individual consumer, and this procedure can
be understood as an adaptation of the Deaton method to the Upper bound −0.23 −0.25 −0.28 −0.31
context of individual-­level data.9 Lower bound and upper bound stand for 95% CI.

s76 Divino JA, et al. Tob Control 2022;31:s74–s79. doi:10.1136/tobaccocontrol-2021-056806

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Table 3 Medical costs and deaths attributable to smoking Table 5 Percentage change scenario for a 10% increase on cigarette
Total prices by income quartile
cost Panel A: change in cigarette expenditures
(BRL Cost per # of  Price elasticity Quartile 1 Quartile 2 Quartile 3 Quartile 4
Chronic condition billion) # of events event (BRL) deaths
 Lower bound 0.40 0.19 0.13 0.05
COPD 15.99 378 594 42 235.70 31 120  Estimated 0.77 0.37 0.26 0.12
Cardiovascular disease 10.26 477 470 21 497.44 34 999  Upper bound 1.20 0.58 0.41 0.20
Stroke 2.17 59 509 36 536.16 10 812  Complete pass-­through 1.60 0.80 0.60 0.30
Pneumonia 0.15 121 152 1205.70 10 900 Panel B: change in medical costs
Lung cancer 2.29 26 850 85 124.20 23 762  Price elasticity Quartile 1 Quartile 2 Quartile 3 Quartile 4
Other cancers 4.00 46 650 85 783.96 26 651  Lower bound −3.50 −2.19 −1.44 −0.43
Total medical cost 34.86 1 110 225 272 383.16 138 244  Estimated −2.44 −1.55 −1.05 −0.31
Source: Pinto et al.1  Upper bound −1.17 −0.78 −0.57 −0.18
COPD, chronic obstructive pulmonary disease. Panel C: change in income (years of life lost cost)
 Price elasticity Quartile 1 Quartile 2 Quartile 3 Quartile 4
 Lower bound −3.68 −5.58 −2.01 −0.50
a 10% cigarette price increase should reduce the number of
smoking individuals by about 2.6% when considering the only  Estimated −2.57 −3.95 −1.47 −0.37
the unconditional price elasticity. The largest deviation from  Upper bound −1.22 −1.98 −0.80 −0.21
this number is observed for the group of people aged 60 years Panel D: net income effect
and above. (This increase of the price elasticity can be explained  Price elasticity Quartile 1 Quartile 2 Quartile 3 Quartile 4
using descriptive statistics. Among this group of individuals, the  Lower bound 6.77 7.57 3.32 0.87
prevalence of smoking drops to 13%, as compared with 22%  Estimated 4.24 5.13 2.26 0.56
among the individuals aged 50–59 years. Dictated by demo-  Upper bound 1.19 2.18 0.96 0.18
graphics, the oldest cohort also contains a considerably higher Panel A shows the results from equation (5). Panel B shows the results from
share of women who were shown to smoke less and tend to have equation (6). Panel C shows the results from equation (7). Complete pass-­through
a more elastic price elasticity.) Consequently, the observed differ- refers to elasticity equal to zero. All calculations use values from tables 2–4. Panel D
ences in the total price elasticities stem from its second compo- is the negative of the sum of Panels A–C.
nent, the conditional price elasticity. Age is thus apparently a
factor that makes smokers less sensitive to price changes while

the contrary is observed for income. While this evidence is in
line with the findings from Egypt, Bulgaria and Turkey,10 other
related studies2 6 from Eastern Europe report that the magnitude
of the price elasticity declines with income. However, as in our
case, these differences are relatively small and not statistically
different across the groups. Our estimates of the price elasticity
are in the range of –0.4 to –0.8, which were also found by11
in a variety of studies for developing countries using alternative
methodologies.
Tables 3 and 4 assemble the medical costs and deaths of several
chronic conditions that are attributable to smoking such as
cardiovascular diseases, strokes, pneumonia, cancers and other
pulmonary diseases that occurred in Brazil during 1 year. From
the number of premature deaths and the average life expectancy,
it can be inferred the total number of years of life lost due to
smoking.1 In a second step, costs are attributed to the premature
deaths and to living with poor quality of life. These costs sum up
to BRL 12 308 billion.
We consider the effects of a 10% cigarette price increase. This
is equivalent to raising PIS/COFINS (a federal consumption tax
levied on the company’s turnover) from 11% to approximately
16%, that is, a five basis points increase. This new tax rate would
lead to, approximately, a 2.5 basis points increasing in the total
cigarette tax burden. The increase in the PIS/COFINS tax rate
Table 4 Productivity related costs attributable to smoking
Total (BRL billion)
Premature death 7.51
Living with poor quality of life 9.99
Total 17.50
The number of (years of life lost (YLL) considered is 3 719 814. Source: Pinto et al.1
Divino JA, et al. Tob Control 2022;31:s74–s79. doi:10.1136/tobaccocontrol-2021-056806
copyright.
is relatively easy to implement, and most importantly, the tax
revenue is earmarked to finance social programmes and social
security expenses.
Table 5 reports the effects of a 10% increase in the price of
cigarettes by income quartile, resulting from a tax increase of 5
basis points in the PIS/COFINS, for instance. According to Panel
A, the 25% poorest individuals experience the largest increase
in cigarette expenditure (0.77%). Following the literature, we
can investigate what would happen if individuals had no sensi-
tivity at all to cigarette price changes (smoking price elasticity
equal to zero). This complete pass-­through case can be consid-
ered as a baseline scenario where all individuals experience a
net income loss since they have an increase in their cigarette
expenses with no other income benefit (in terms of reduction in
medical expenses and years of life lost costs, for instance). It is
worth highlighting that the poorer would be in disadvantage in
this scenario since they face the highest net income loss (1.6%).
However, they benefit most from reduction in medical expenses
(2.44%) and decrease in years of life lost (2.57%). There is a
net income gain of 4.24%. Similar results could be observed for
quartile 2, where individuals obtain a net income gain of 5.13%
as a result of the 10% increase in cigarette prices. Thus, this is
a very effective progressive tax policy as it benefits the poorer
most.
Table 6 illustrates the effects of a 10% increase of cigarette
prices by age cohort. It is noticeable that cigarette expenditures
increase by 0.48% on average, with small differences across age
Cost per YLL (BRL) cohorts. However, individuals aged between 30 and 49 years old
enjoy larger benefits in terms of reductions in medical expenses
2815.97
than individuals aged above 50 years. Those between 50 and 60
9492.96
years old benefit most in terms of reduction in years of life lost
12 308.92 cost. This result is a little surprising because this cohort has a
smaller probability of reducing, or even quitting smoking and
s77
 Original research

Tob Control: first published as 10.1136/tobaccocontrol-2021-056806 on 4 October 2021. Downloaded from http://tobaccocontrol.bmj.com/ on October 3, 2023 by guest. Protected by
that the deaths attributable to smoking represent nearly 28% of
Table 6 Percentage change scenario for a 10% increase on
the total number of deaths.
cigarettes price by age cohort
Panel A: change in cigarette expenditures
Price elasticity 15–29 30–39 40–49 50–59 60+ Conclusion and policy recommendations
Lower bound 0.27 0.25 0.32 0.26 0.15 The results of this research suggest that a tobacco tax increase
Estimated 0.50 0.45 0.55 0.45 0.45 would benefit the entire Brazilian population. The positive
Upper bound 0.78 0.70 0.82 0.69 0.82
effects emerge because higher tobacco taxes reduce cigarette
consumption and lead to lower medical costs and longer,
Complete pass-­through 1.00 0.90 1.00 0.80 0.80
healthier and more productive lives, which ultimately results in
Panel B: change in medical costs
higher incomes for everyone.
Price elasticity 15–29 30–39 40–49 50–59 60+
The extended cost–benefit analysis considered a 10% price
Lower bound −1.31 −0.86 −0.75 −0.65 −0.87
increase resulting from a raise in taxes on manufactured ciga-
Estimated −0.90 −0.59 −0.49 −0.41 −0.46
rettes. The average net income effects were 4.24% and 5.13%
Upper bound −0.39 −0.26 −0.19 −0.13 0.03 increases in the first and second quartiles, respectively. These
Panel C: change in income (years of life lost cost) gains in income result from combining the effects of higher
Price elasticity 15–29 30–39 40–49 50–59 60+ cigarette expenses due to the higher price, reduction in medical
Lower bound −2.50 −1.51 −2.17 −3.02 −1.71 expenses with the decrease in smoking and gain in future years
Estimated −1.71 −1.03 −1.43 −1.92 −0.91 of employment due to the health improvement. More impor-
Upper bound −0.75 −0.45 −0.56 −0.60 0.05 tantly, the effects of such a policy are progressive in the sense
Panel D: net income effect that they are more beneficial for those individuals below the
Price elasticity 15–29 30–39 40–49 50–59 60+ median income. Thus, the gains increase as the income quartile
Lower bound 3.53 2.12 2.59 3.41 2.43 decreases.
Estimated 2.11 1.17 1.37 1.88 0.92 The findings are similar by age cohorts. The highest net
income effects were observed for the youngest, aged between
Upper bound 0.37 0.01 −0.07 0.03 −0.90
15 tand 29 years, and for middle aged people, between 40 and
Panel A shows the results from equation (5). Panel B shows the results from
equation (6). Panel C shows the results from equation (7). Complete pass-­through 59 years old. This is the case because the youngest have low
refers to elasticity equal to zero. All calculations use values from tables 2–4. Panel D income and thus a higher benefit on future years of employment
is the negative of the sum of panels A–C. by reducing or quitting smoking. In case of middle-­aged people,
the high income is driving the effect.
We recommended a raise in PIS/COFINS be used to generate

copyright.
the advanced age mechanically reduces the years left in life. the 10% increase on manufactured cigarettes price used in the
However, the high average income dominates and explains the simulation exercises. The advantages are that the tax change
observed outcome. The younger group experiences the largest could be more easily implemented by the government because
reduction in medical expenses and productivity costs. However, the additional tax revenue is earmarked for social expenses.
the probability they suffer from any tobacco-­ related disease For example, a 10% price growth is roughly reached by a tax
described in table 6 is quite small due to their lower age. increase of about five basis points in the PIS/COFINS tax rate.
Table 7 reports the changes in death rates for quartiles of Tobacco tax increases have an important advantage, meaning
income and age cohorts resulting from the same previous 10% that the poorest individuals represented by the first quartile
increase on cigarette prices. It can be observed that individuals of income experience the largest increase in cigarette expen-
between 40 and 60 years old benefit the most. The reduction is ditures and biggest reductions in medical expenses. Addition-
between 10 and 15 deaths per 10 000 people in these groups. For ally, those in the second quartile of income shows the biggest
the sake of comparison, the overall death rate in Brazil is stable: reduction in the years of life lost. As a result, both of them
around 6.4 deaths per 1000 people for the last 5 years. The (individuals with income below the median) have the largest
reduction in deaths due to cigarette price increases represents a gain in net income.
decrease between 15% and 23% of the overall death rate in the To broaden the social reach of the tobacco control policy, it is
country. This is a significant result since Pinto et al1 estimates advisable that the tax increase policy on manufactured cigarettes
be accompanied by other measures that increase the economic
and social costs of smoking and curb illicit trade through better
policy coordination, higher levels of monitoring and penalties.
Table 7 Change in death due to a 10% increase on cigarette prices A good example comes from the state of São Paulo, which has
by cohort and income quartile (per 10 000 people) the highest tax burden on cigarette prices in the country and
Age group recently prohibited smoking in all municipal parks across the
Price elasticity 15–29 30–39 40–49 50–59 60+ city. Coupled with the highest cigarette tax burden, this measure
Lower bound −10.39 −9.54 −14.75 −23.65 −12.00 adds to several others adopted by the state focused on raising
Estimated −7.13 −6.53 −9.75 −15.05 −6.41 the social inconvenience of smoking by imposing several legal
Upper bound −3.14 −2.86 −3.83 −4.68 0.37 restrictions on the smoking behaviour.
Income quartile
Brazil has reached undeniable progress in reducing smoking
prevalence trough an adequate combination of public policies.
Price elasticity Q1 Q2 Q3 Q4
Our key message is that the country can go one step further on
Lower bound −5.87 −14.50 −8.16 −7.19
the tax increase policy. The present study clearly indicates that
Estimated −4.10 −10.27 −5.95 −5.31
such a tax increase not only reduces cigarette consumption but,
Upper bound −1.96 −5.16 −3.25 −2.98 most surprisingly, higher cigarette prices even imply an increase
Lower bound and upper bound stand for 95% CI. in net income for smokers.
s78 Divino JA, et al. Tob Control 2022;31:s74–s79. doi:10.1136/tobaccocontrol-2021-056806

There are some caveats to the analysis. This is a partial equi-
librium analysis focused on the legal market of cigarettes, which
does not account for second order effects of price adjustments
that would appear in a general equilibrium framework. The
medical costs and years of life lost (YLL) are not specific by
income quartiles or age cohorts due to the lack of data avail-
ability. Due to data limitations, we used average measures of
medical costs and productivity. Nonetheless, improved and more
disaggregated data are necessary to assess the heterogeneities
in medical expenses and YLL across income quartiles and age
cohorts, which may influence the magnitudes and distribution
of net income effects. Similarly, by using state average prices, we
are able to avoid an endogeneity bias but are likely to miss some
heterogeneity across consumers. The cost–benefit analysis refers
to the net income variation and does not represent a welfare anal-
ysis. Consequently, other sources of costs and benefits, including
forgone (dis)utility of smokers, are not considered because of the
difficulty to measure such effects. Spillover and peer effects from
less smoking are also not accounted for. Some of these issues,
however, are being addressed in our ongoing research.
What this paper adds
What is already known on this subject
⇒ About 150 000 Brazilians die from smoking related diseases
every year. Smokers and their families also suffer from
forgone income and worse living conditions. Medical costs
from smoking amount to approximately BRL 38 billion per
year. Progress has been made in recent years to reduce
smoking prevalence, through legal restrictions on smoking
behaviour and tax policy measures. However, more needs
to be done to reduce tobacco consumption and improve
Brazilians’ quality of life.
What this paper adds
⇒ The PIS/COFINS (a social contribution levied on cigarettes)
should be used to generate the 10% increase in
manufactured cigarettes price. The advantages are that the
tax change could be easily implemented by the government,
and the additional tax revenue is earmarked to social
expenses.
⇒ We found that tobacco tax increases is a very effective
progressive policy as it benefits the poorer the most. Each
10% price increase (BRL 0.54), due to higher tobacco taxes,
reduces cigarette consumption by about 5%, and for poor
smokers, it would lead to net income gains by about BRL
39.00 per month (in 2019 values).
⇒ We evaluated the impact of price increases as a result of
higher taxes on cigarettes. Higher tobacco taxes lead to lower
medical expenses on tobacco-­related diseases and a longer,
healthier and more productive life.
Acknowledgements We are grateful to Frank Chaloupka, German Rodriguez
Iglesias, Erika Siu, Alan Fuchs and seminar participants at the 2019-­UIC and LAC
partners meeting in Mexico City for their comments and suggestions. We would also
Divino JA, et al. Tob Control 2022;31:s74–s79. doi:10.1136/tobaccocontrol-2021-056806
Original research
Tob Control: first published as 10.1136/tobaccocontrol-2021-056806 on 4 October 2021. Downloaded from http://tobaccocontrol.bmj.com/ on October 3, 2023 by guest. Protected by
like to thank two anonymous referees and the editor for valuable comments and
suggestions.
Contributors All coauthors contributed to the research and paper drafting.
Funding This research (grant number 17409) is funded by the University of Illinois
at Chicago’s (UIC) Institute for Health Research and Policy to conduct economic
research on tobacco taxation in Brazil. UIC is a partner of the Bloomberg Initiative to
Reduce Tobacco Use. The views expressed in this document cannot be attributed to,
nor do they represent, the views of UIC, the Institute for Health Research and Policy,
or Bloomberg Philanthropies.
Disclaimer The views expressed in this document cannot be attributed to, nor
do they represent, the views of UIC, the Institute for Health Research and Policy, or
Bloomberg Philanthropies.
Competing interests None declared.
Patient consent for publication Not applicable.
Provenance and peer review Not commissioned; externally peer reviewed.
Data availability statement Data are available in a public, open access
repository. The public data used in the paper are: (1) National Household Sample
Survey (PNAD) de 2008, available at https://www.ibge.gov.br/estatisticas/sociais/​
educacao/9127-pesquisa-nacional-por-amostra-de-domicilios.html?edicao=9128&​
t=downloads (2) National Health Survey (PNS) de 2013, available at https://www.​
ibge.gov.br/estatisticas/sociais/saude/9160-pesquisa-nacional-de-saude.html?=&​
t=downloads (3) Risk Factor Surveillance and Protection for Chronic Diseases by
Telephone Survey (VIGITEL), which is performed annually, available at http://svs.aids.​
gov.br/download/Vigitel/All these surveys are anonymized and fully opened to public
access.
ORCID iDs
Jose Angelo Divino http://orcid.org/0000-0001-7359-7539
Philipp Ehrl http://orcid.org/0000-0002-6661-8976
Osvaldo Candido http://orcid.org/0000-0002-4850-6989
Marcos Aurelio Pereira Valadao http://orcid.org/0000-0002-9301-3366
REFERENCES
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técnico IECS N° 21. Buenos Aires, Argentina. Maio de: Instituto de Efectividad Clínica
y Sanitaria, 2017Available. https://www.inca.gov.br/sites/ufu.sti.inca.local/files//​
media/document//carga-doenca-atribuivel-uso-tabaco-brasil.pdf
2 Fuchs A, Gonzalez Icaza MF, Paz DP. Distributional effects of tobacco taxation: a
comparative analysis. In: Policy research working paper series, 8805. The World Bank,
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concepção E metodologia de aplicação. Ciênc. saúde coletiva 2014;19:333–42.
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worldbank.org/doi/abs/10.1596/1813-9450-8327
7 WHO. Economics of tobacco toolkit: economic analysis of demand using data
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8 Ehrl P, Monasterio L. Skill concentration and persistence in Brazil. Reg Stud
2019;53:1544–54.
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1988;78:418–30.
10 IARC (International Agency for Research on Cancer). Effectiveness of tax and price
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tobacco control. Washington D.C: World Bank, 1999.
s79
Indonesian Journal of International Law
Volume 11
Number 4 Various Aspects of International Law Article 8
II

7-31-2014

The Controversy of Trade in Tobacco and Protection ofPublic

Health, A Study of Tobacco Control Measures andImpacts on
Trademark Practice: The Stricter, The Better?
Nattapong Suwan-in
School of Law, Assumption University of Thailand, tapong.suwan-in@au.edu.th

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Recommended Citation
Suwan-in, Nattapong (2014) "The Controversy of Trade in Tobacco and Protection ofPublic Health, A
Study of Tobacco Control Measures andImpacts on Trademark Practice: The Stricter, The Better?,"
Indonesian Journal of International Law: Vol. 11 : No. 4 , Article 8.
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 The Controversy of Trade in Tobacco and Protection of Public Health,

The Controversy of Trade in Tobacco and Protection of

Public Health, A Study of Tobacco Control Measures and
Impacts on Trademark Practice: The Stricter, The Better?

Nattapong Suwan-in1*

Abstract
This paper investigates the anticipated trademark problems may result from tobacco control
regulations, particularly the warning label requirements implemented in WTO members and the
stricter regulation of plain packaging promulgated in Australia (“tobacco measures”). Following
the adoption of the Framework Convention on Tobacco Control (“FCTC”) in May 2003 (enforce
by February 2005), member countries tend to seek for possibilities to implement and use stricter
approach to achieve their public health policy. As the core concept and main goal of WTO is trade
liberalization, regardless of types of goods traded among members, whereas the stricter restriction on
trademark use means the prohibition of exploiting intellectual property rights of trademark owners,
TRIPS is thus unavoidably related and has been brought by tobacco companies to be against the
regulations, claiming that this poses unjustifiable trade barriers to business and denying its legitimacy
in corresponding to the WTO obligations. To what extent the FCTC instructs or entitles members to
pose barriers on trade in tobacco basing on public health purpose? Is there any correlation between
the FCTC, a framework adopted under World Health Organization (“WHO”), and the covered
agreements under WTO such as TRIPS?

Keywords: warning label, plain-packaging, TRIPS, tobacco control regulation,

Framework Convention on Tobacco Control, FCTC, public health policy

I. INTRODUCTION
Cigarette smoking is the single biggest avoidable cause of death and
disability in developed countries2. It has been, from time to time, rap-
idly increasing before the Second World War in the developing coun-
tries3 and becomes one of the biggest threats to current and future world
1 *
Lecturer in Law, School of Law, Assumption University of Thailand; LLB, iMBA-Law
(National Taiwan University of Science and Technology, Republic of China), PhD candi-
date (College of Law, National Taiwan University, Republic of China); Registered Lawyer
of Thailand; Notarial Services Attorney of Thailand. The author would like to thank Prof.
Lo Chang-fa for his advice during my research on the topic and also my former colleague,
Ms. Pattaravadee Kongcharoenniwat for her comments. The author can be reached at nat-
tapong.suwan-in@au.edu and law.ghchen@gmail.com. The usual disclaimer applies.
2
See general Richard Edwards, the Problem of Tobacco Smoking, Clinical Review (2004),
available at http://www.bmj.com/content/328/7433/217.full (last visited Jun. 17, 2012).
3
P. Vateesatokit, B. Hughes and B. Ritthphakdee, Thailand: Winning Battles, but the War’s
Far from Over (2000), at 1, available at http://bmj-tobacco.highwire.org/content/9/2/122.

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Jurnal Hukum Internasional

health as it does not affect only to people but also provide social and
unavoidable economic consequences. It is estimated that tobacco use
causes death for more than five million people a year and the number
could raise to more than eight million by 2030 unless measures are
taken to control the tobacco epidemic4.
To cope with the situation, various measures have been adopted to
control tobacco consumption5. This includes the early policy of warn-
ing label requirement (“health warning label”) that has been being used
in many countries as well as the recent development of the stricter rule
of tobacco control such as plain packaging (“plain package”) in Austra-
lia adopted in 20116. In Thailand, one of the early countries adopted the
control measures, because of a high consumption of tobacco in the coun-
try back in 1980s7, with internal force of public8, government passed the
Tobacco Products Control Act B.E. 2535 and the Non-Smokers’ Health
Protection Act B.E. 2535 which cover important provisions on i) total
ban on tobacco advertising, promotion and sponsorship, ii) prohibition
of youth access to tobacco (under 18), iii) disclosure of constituents and
emission of product to the Ministry of Public Health, iv) warning label
requirement with 9 pictorial health warnings, and v) prohibition of the
misleading descriptors such as “light” or “mild”, and so on.9. These fol-
lowed after the first ban on tobacco advertising of Thai government by
including tobacco in the dangerous products category under the Con-
sumer Protection Act which brought WTO dispute against Thailand on
GATT violation10.
While in US, the battle between big tobacco companies and US
government also brought some social awareness, evidenced in the law-

full (last visited Jun. 17, 2012).

4
Valentina S. Vadi, Global Health Governance at a Crossroads: Trademark Protection v.
Tobacco Control in International Investment Law, 48 Stan. J. Int’l L. 93 (2012), at 95-96.
5
Such as plain packaging, prohibition on promotion and advertisement, excise tax and etc.
6
Tania Voon, Acquisition of Intellectual Property Rights: Australia’s Plain Tobacco Pack-
aging Dispute, E.I.P.R. 2013, 35(2), 113-118 (2013), at 113-114.
7
See Vateesatokit, Hughes and Ritthphakdee, supra note 2, at 2.
8
Id.
9
Thailand Tobacco Products Control Act B.E. 2535 (1992), sec. 4, sec. 8-9, and sec. 11-
13.
10
Panel Report, Thailand-Restriction on Importation of Internal Taxes on Cigarettes,
BISD/37/S/200 (Nov. 7, 1990).

558 Volume 11 Number 4 July 2014

 The Controversy of Trade in Tobacco and Protection of Public Health,

suits against the Food and Drug Administration (“FDA”) of the five
tobacco companies and R.J. Reynolds before the federal court in Ken-
tucky. This happened soon after the President Obama signed the Family
Smoking Prevention and Tobacco Control Act (“FSPTCA”) in 2009,
which gives FDA authority to regulate tobacco products and amends
the Federal Cigarette Label Advertising Act to require cigarette makers
to place larger warning labels on their package. The claims based on
the ground of constitution and freedom of speech violation as well as
trademark (including trade dress) infringement11. In European Union
(“EU”), after the European Parliament and the Council of the EU have
adopted the Directive in 200112, label litigations were also raised to op-
pose by tobacco companies, claiming an infringement of Article295 EC
and member states’ systems of property ownership and a violation of
trademark provisions in TRIPS. Among various issues under consider-
ation of the European Court of Justice (“ECJ”), a number of provisions
in TRIPS (i.e. Article 8 and Article 17) were ignored by court to strike
down to rule a precedent13 and left important issues undecided on its le-
gitimacy. Along with stricter approach of the plain package being used
in Australia and the problem on uncertainty of legal compatibility of the
tobacco regulations with TRIPS, many contentious issues are yet un-
solved but can likely be settled by the use of an interpretative tool avail-
able in the Vienna Convention on the Law of Treaty or VCLT14. At least
in the contexts of the warning label requirement and the plain packag-
ing regulation, Articles 31 and 32 are undeniably relevant according to
TRIPS Article 64.1 that can be used for purpose of interpretation of the
arguments in Articles 8, 15, 16, 17 and 20. The research can be expected
to produce a reliable-legal-base answer and provide public analyzing
steps to base on. This is according to the customary rule of interpreta-
tion that TRIPS should, at the end, comply.

11
See generally Benjamin A. Hackman, On the Mark? Big Tobacco Asserts Property
Rights on Cigarette Packaging, 29 Penn St. Int’l L. Rev. 809 (2011).
12
Id., at 811.
13
Id., at 817.
14
See generally Vienna Convention on the Law of Treaties, 1155 U.N.T.S 331, 8 I.L.M.
679 (1969) [hereinafter VCLT] art. 31 and art. 32.

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II. INTRODUCTION TO FUNDAMENTAL RULES OF TRIPS

AND TRADEMARK
TRIPS or the Agreement on Trade-Related Aspects of Intellectual
Property Rights, constituting as Annex 1C of the Agreement Establish-
ing the World Trade Organization (“WTO Agreement”)15, is the most
comprehensive international agreement on intellectual property pro-
tection16. With pressure from the United States Trade Representative
(“USTR”) through the use of the Special 30117 , TRIPS was concluded
and put into force in 1995, setting down a minimum standard of pro-
tection, in many forms of intellectual property (“IP”). With respect to
trademark, TRIPS recognizes trademark and provides protections de-
tailed in Section 2 of Part II, Standards Concerning the Availability,
Scope and Use of IPRs, which covers seven provisions. Looking back
into TRIPS’ history, the regulation on trademark was not a major nego-
tiation issue as controversial as patents. The major dissent between the
two sides of developed and developing countries in the field of trade-
mark, in retrospect, was the extent to i) which rules complementing the
Paris Convention should be harmonized in a future agreement within
the GATT and ii) whether countries could continue establishing them at
the national level. As the consequence, the first compilation proposed
by the Chair was the substantive and procedural shortcomings of trade-
mark protection in GATT, which revealed no major problems in Paris
Convention, and TRIPS was so drafted in the way to compile and pro-
vide some clarifications18.
Though TRIPS seems to complete what Paris Convention lacked, as
the parties initially put forward of their emphasis on the international
harmonization of IP standard and enforcement especially on patent, the
provisions of trademark, in comparison to patents, are likely regulated
imbalanced. That being said, though TRIPS acknowledges trademark as

15
WTO Agreement, Marrakesh Agreement Establishing the World Trade Organization,
Apr. 15, 1994, The Legal Texts: The Results Of The Uruguay Round Of Multilateral Trade
Negotiations 4 (1999), 1867 U.N.T.S. 154, 33 I.L.M. 1144 (1994), List of Annexes, An-
nex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights [hereinafter
WTO Agreement].
16
Terence P. Stewart, The GATT Uruguay Round: A Negotiating History, 478-79 (1993).
17
Id.
18
Id., at 207-208.

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 The Controversy of Trade in Tobacco and Protection of Public Health,

a private right similarly to patent19 described in the Preamble, it seem-

ingly fails to recognize “the enjoyment of right without discrimination”.
By comparing with patent provision in Article 27, whether this failure
is good or not, the terms carefully chosen should literally connote a
limited protection of trademark rights given to owners such in a manner
of being restricted to the Articles 15, 16, 17 and 20. This primary under-
standing is important to analysis on legitimacy of the tobacco measures
in the following chapter such as the warning label and plain package20.
As trademark is long recognized to function as to i) promote market and
sell products (advertising function), ii) refer to a particular enterprise
(differentiation function), iii) refer to a particular quality of the product
(guarantee function), and iv) indicate origin or source of one’s prod-
uct from others’ (indication of origin function)21, impacts on trademark
functions and practical trademark system shall also be important that
deserve to mention and include in the study. This is in order to manifest
the consequences of tobacco measures in practice, a view of holistic-
approach perspective that current research rarely touched upon.

III. DISPUTES ON TRIPS AGREEMENT AND TREATY INTER-

PRETATIVE TOOLS
DSB and Dispute Settlement Understanding (“DSU”) are not relat-
ed to TRIPS merely because Article 64.1 so indicates but also the nature
of the dispute itself that lies upon the enforcement of the dispute settle-
ment process promulgated in the DSU. Under umbrella of WTO, ac-
cording to Article 3.2, the DSU provides that interpretation of all WTO
agreements, including TRIPS, shall be “in accordance with custom-
19
Agreement on Trade Related Aspects of Intellectual Property Rights, Apr. 15, 1994,
Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, The Legal
Texts: The Results Of The Uruguay Round Of Multilateral Trade Negotiations 320 (1999),
1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994) [hereinafter TRIPS Agreement] Preamble par. 4
provides: “Recognizing that intellectual property rights are private right…”.
20
See generally Trevor Stevens, Tobacco Plain Packaging Reforms: What They Mean to
Australian Trademark Law and our International Obligation (2011), available at http://
www.davies.com.au/pub/detail/501/tobacco-plain-packaging-reforms-what-they-mean-
for-australian-trade-mark-law-and-our-international-obligations (last visited Jun. 18,
2012).
21
Wat Tingsamij, Explanation of Trademark Law, 3 (2002).

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ary rules of interpretation of public international law”22, known in the

name of the Vienna Convention. As evidenced in a number of reports of
Panel and Appellate Body (“AB”), discussion on TRIPS disputes usu-
ally begin with explanation of its correlation with the VCLT and end
up with application and then adjudication. In India-Patent Protection
for Pharmaceutical and Agricultural Chemical Products, the AB has
stated that “ . . .the duty of a treaty interpreter is to examine the words
of the treaty to determine the intentions of the parties. This should be
done in accordance with the principles of treaty interpretation set out
in Article 31 of the Vienna Convention. . .”.23 Thus, it is very rational
to start our analysis of legitimacy of the health warning label and plain
packaging regulations by reviewing the tools of interpretation, starting
with Article 31, the General Rule of Interpretation, of the provisions in
the VCLT24.

A. VCLT
Article 31: General Rule of Interpretation reads:

1. A treaty shall be interpreted in good faith in accordance with the

ordinary meaning to be given to the terms of the treaty in their
context and in the light of its object and purpose.

22
Understanding on Rules and Procedures Governing the Settlement of Disputes, Mar-
rakesh Agreement Establishing the World Trade Organization, Annex 2, The Legal Texts:
The Results Of The Uruguay Round Of Multilateral Trade Negotiations 354 (1999), 1869
U.N.T.S. 401, 33 I.L.M. 1226 (1994) [hereinafter DSU] art. 3.2 provides: “The dispute
settlement system of the WTO is a central element in providing security and predictability
to the multilateral trading system. The Members recognize that it serves to preserve the
rights and obligations of Members under the covered agreements, and to clarify the exist-
ing provisions of those agreements in accordance with customary rules of interpretation
of public international law. Recommendations and rulings of the DSB cannot add to or
diminish the rights and obligations provided in the covered agreements”.
23
Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricul-
tural Chemical Products, 45, WT/DS50/AB/R (Dec. 19, 1997) [hereinafter India-Patent
for Pharmaceuticals Appellate Body Report]; Panel Report, India – Patent Protection
for Pharmaceutical and Agricultural Chemical Products, WT/DS50/R (Sept. 5, 1997), as
modified by Appellate Body Report.
24
Nattapong Suwan-in, Compulsory License, A Long Debate on TRIPS Agreement Inter-
pretation: Discovering the Truth of Thailand’s Imposition on Pharmaceutical Patents, 7
Asian J. WTO & Int’l Health L. & Pol’y 225 (2012), at 231-232.

562 Volume 11 Number 4 July 2014

 The Controversy of Trade in Tobacco and Protection of Public Health,

2. The context for the purpose of the interpretation of a treaty shall

comprise, in addition to the text, including its preamble and annexes:
a) Any agreement relating to the treaty which was made between
all the parties in connection with the conclusion of the treaty;
b) Any instrument which was made by one or more parties in con-
nection with the conclusion of the treaty and accepted by the
other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context:
a) Any subsequent agreement between the parties regarding the in-
terpretation of the treaty or the application of its provisions;
b) Any subsequent practice in the application of the treaty which
establishes the agreement of the parties regarding its interpreta-
tion;
c) Any relevant rules of international law applicable in the rela-
tions between the parties.

Article 31 begins its core concept of interpretation with a plain

meaning against a broader context of holistic approach. Though there is
no term holistic or rational in the provision, its key captures the corner-
stone that TRIPS must be interpreted in good faith in accordance with
the ordinary meaning to be given to the terms in their context and in the
light of its object and purpose. The wording suggests a logic of human
nature and cogent belief that interpretation must be first started some-
where with the ordinary terms and its meanings before extending its un-
derstanding to surrounding context as well as object and also purpose25.
As Prof. Susy Frankel described Article 31 as a “logical progression”
rather than a “hierarchy of legal norms”26 and the Appellate Body in
United States-Standards for Reformulated and Conventional Gasoline
has also confirmed that the need to apply other rules of international law
is unnecessary if Article 31.1 already provides the answer27, in consid-
eration of the case of tobacco measures, our analysis shall then accord-
ingly be scoped and focused on i) the treaty terms provided in TRIPS,
ii) its object and purpose provided in Article 8, iii) TRIPS’ preamble,
25
Id., at 232-233.
26
Susy Frankel, WTO Application of “the Customary Rules of Interpretation of Public
International Law” to Intellectual Property, 46(2) Va. J. Int’l L. 365, 386 (2006).
27
Appellate Body Report, United States – Standards for Reformulated and Conventional
Gasoline, WT/DS2/AB/R (Apr. 29, 1996).

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Jurnal Hukum Internasional

and iv) any subsequent agreement or practice or any relevant rules by

means of VCLT Article 31.3, in order to conclude if the measures are in
violation of provisions in TRIPS. To facilitate an interpretation, FCTC
and the Doha Declaration on Public Health (“Doha Declaration”) are
usually brought by implementing states to support their legitimacy and
compatibility with international obligations. To what extent FCTC can
be used to support government’s argument and to what extent FCTC
can entitle Member states to pose barrier on trade in tobacco, resulted
from the warning label and/or plain packaging requirement, as claimed
by Australia?28 In response to these, our analytical study in the follow-
ing session will hence demonstrate the correlation of the FCTC, the
Doha Declaration, and TRIPS by means of Article 31 of the VCLT. As
the Doha Declaration was previously analyzed in the author’s article29
and it is nowadays confirmed by the AB’s decision in US-Clove Cig-
arettes that the Declaration can constitute as a subsequent agreement
subject to VCLT Article 31.3(a)30, the one problem left for determina-
tion is then the legal status of the FCTC. This is in order to solve the
TRIPS-violation-dispute questions.

B. Framework Convention on Tobacco Control: Its

Role and the Legal Status
1. Introduction to the Framework Convention on Tobacco Control —
The WHO Framework Convention on Tobacco Control or FCTC
is the first treaty adopted in World Health Organization by virtue
of Article 19 of the Constitution. Within the competence of the
organization, Health Assembly of WHO has authority to adopt
conventions or agreements with respect to any matter related31.

28
Australia Tobacco Plain Packaging Act 2011, No.148, 2011, Sec. 3 (1)(b) provides: “to
give effect to certain obligations that Australia has as a party to the Convention on Tobacco
Control”; See also Tania Voon, Flexibilities in WTO Law to Support Tobacco Control
Regulation, 39 Am. J.L. & Med. 199 (2013), at 204-205.
29
See generally Suwan-in, supra note 23.
30
See Benn McGrady, Revisiting TRIPS and Trademark: the Case of Tobacco (2012), at
2, available at http://ssrn.com/abstract=2144269 (last visited Jul. 29, 2013).
31
World Health Organization Constitution, 14 U.N.T.S 185 (1948) [hereinafter WHO
Constitution] art. 19 provides: “The Health Assembly shall have authority to adopt con-
ventions or agreements with respect to any matter within the competence of the Organiza-

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 The Controversy of Trade in Tobacco and Protection of Public Health,

To the first time that the Health Assembly has ever adopted, WHO
activated its constitution to develop the treaty to protect present and
future generations from health, social and economic consequences
of tobacco use32. Especially at this time when the global nature of the
tobacco epidemic required a global health governance mechanism
to effectively address the problem, the move represented a major
breakthrough in international public health law as WHO has never
before adopted conventions, despite of the instruments, for instance,
recommendations and regulations33. The convention reflects
scientific consensus on the lethal effects of tobacco smoke and
advances global cooperation for tobacco control34, so adopted on
May 21, 2003 in the 56th World Health Assembly and came into force
on February 27, 200535. It contains thirty-eight provisions in total,
regulates from the rules that govern production, sale, distribution,
advertisement, and taxation of tobacco to protection of environment
and settlement of disputes, just to name a few. Similarly to TRIPS,
FCTC provides minimum standard of requirements suggested to its
member. Because the FCTC, by law, binds only the state parties
that have ratified it (currently signed by 168 countries and of 177
ratifying countries36), in case where there is conflict with other treaty
regimes such as TRIPS, one may question about its legal status and
their correlation. This is especially when the FCTC suggests and
uses a non-obligatory language and even a very open-ended term.

tion. A two-thirds vote of the Health Assembly shall be required for the adoption of such
conventions or agreements, which shall come into force for each Member when accepted
by it in accordance with its constitutional processes”.
32
World Health Organization Constitution, Framework Convention on Tobacco Control
(2005) [hereinafter FCTC] art. 3 provides: “The objective of this Convention and its pro-
tocols is to protect present and future generations from the devastating health, social, envi-
ronmental and economic consequences of tobacco consumption and exposure to tobacco
smoke by providing a framework for tobacco control measures to be implemented by the
Parties at the national, regional and international levels in order to reduce continually and
substantially the prevalence of tobacco use and exposure to tobacco smoke”.
33
See Vadi, supra note 3, at 100-101.
34
Id., at 101-102.
35
Wikipedia, the Free Encyclopedia, World Health Organization Framework Convention
on Tobacco Control, http://en.wikipedia.org/wiki/World_Health_Organization_Frame-
work_Convention_on_Tobacco_Control (last visited Aug. 26, 2013).
36
Id.

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2. FCTC and its Legal Status subject to the Vienna Convention.

— FCTC, by relying on Article 19 of the Constitution37, is an
international convention or agreement legitimately resolved via
voting at the ratio of two thirds in majority by the assembly and
also in pursuit of the constitutional procedure38. To likely constitute
as a subsequent agreement according to points of views of some
scholars, claiming that FCTC can be a ground to strengthen and
support developing countries from departure of their burden of
disease from tobacco when this sort of tobacco control infrastructure
was absent, to our remark that the FCTC is a framework convention
under the WHO, while TRIPS is of or belongs to the WTO, to be
interpreted in conjunction with Article 31 of the VCLT, we found
difficulty to agree with the notion with two main reasons in support
of our argument.
First, FCTC and TRIPS are separated agreements, came to alive
for each individual purpose and launched in a different period of time.
While the FCTC, under WHO, has objectives to protect human health
and social consequences from tobacco use, TRIPS, on the other hand is
under WTO, mainly aimed to overcome the problem of discrimination
and generate free trade. As the previous decision made by AB in the
ACP-EC Partnership Agreement39 has previously ruled that “the mate-
rial issues to consider a subsequent agreement by the meaning of Ar-
ticle 31.3(a) of the VLCT shall be (i) adopted by the same parties as of
the covered treaty,40(ii) characterized as an agreement bearing specifi-
cally upon the interpretation of a treaty which is, in the WTO context,
adopted pursuant to Article IX:2 of the WTO Agreement,41 and (iii) in
37
See supra note 30.
38
Id.
39
See generally Ministerial Conference, European Communities – The ACP-EC Partner-
ship Agreement, WT/MIN(01)/15 (Nov. 14, 2001), available at http://www.wto.org/eng-
lish/thewto_e/minist_e/min01_e/mindecl_acp_ec_agre_e.pdf. (last visited Mar. 20, 2012).
40
World Trade Organization [WTO], 18 Dispute Settlement Reports 2008 7281 (June 28,
2010). “We agree with the Panel that the Doha Article 1 Waiver was adopted by the same
parties that approved the European Communities’ Schedule . . . .”
41
Id., at 7281-82 (the International Law Commission (ILC) describes a subsequent agree-
ment within the meaning of Articles 31(3)(a) of the Vienna Convention as a further au-
thentic element of interpretation to be taken into account together with the context”. In our
view, by referring to “authentic interpretation”, the ILC reads Article 31(3)(a) as referring
to agreements bearing specifically upon the interpretation of a treaty. In the WTO context,

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force as to interpret the covered treaty, not to connote the creation of

new obligation or modification of the covered treaty”,42 it is difficult to
say that FCTC is a subsequent treaty adopted pursuant to Article IX:2
of the WTO Agreement and in force to interpret TRIPS, the covered
agreement and treaty in dispute. This is though a scholar such as Prof.
Benn McGrady likely sees the provisions of FCTC being relevant in
interpretation of WTO law (so as its guideline), regardless of the fact
that it was made under WHO43. Without support from the Panel’s and
AB’s decisions in the recent case of US-Clove Cigarettes that conclud-
ed nothing explicitly regarding the legal status of the FCTC but literally
and merely, an acknowledgement and recognition of importance of to-
bacco control to Member countries44, therefore, it is thorny to conclude
that the FCTC can contribute to interpret TRIPS as a subsequent agree-
ment though some proponents and implementing countries may so far
attempt to claim so45.
Second, the authority of the Health Assembly, according to Article
19 of the WHO constitution, is limited to only the adoption of conven-

multilateral interpretations adopted pursuant to Article IX:2 of the WTO Agreement are
most akin to subsequent agreements within the meaning of Article 31(3)(a) of the Vienna
Convention . . . .” The Doha Declaration is also adopted pursuant to Article IX:2 of the
WTO Agreement because it was proposed initially through the TRIPS Council which in
turn made recommendations to the General Council and the General Council then reported
to the Ministerial Conference at Doha, which oversaw the functioning of the TRIPS (An-
nex 1C), and approved by consensus from all Members. Article IX:2 reads “The Min-
isterial Conference and the General Council shall have the exclusive authority to adopt
interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of
an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their
authority on the basis of a recommendation by the Council overseeing the functioning of
that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths
majority of the Members. ).
42
Id., at 7282.
43
Benn McGrady, Trade and Public Health: The WTO, Tobacco, Alcohol, and Diet, 36-37
(2011) “The basic obligations set out in a number of provisions have been supplemented
by guidelines that are an expression of best practice… assuming this to be the case, these
guidelines arguably fill out the content of basic FCTC obligations and would be relevant
in interpretation of WTO law in much the same way as the provisions of the FCTC itself”.
44
See Voon, supra note 27; See also McGrady, supra note 29, at 6; See also Tania Voon,
Note on WTO Appellate Body Report in US-Measures Affecting the Production and
Sale of Clove Cigarettes (2012), at 8, available at http://papers.ssrn.com/sol3/papers.
cfm?abstract_id=2143804 (last visited Jul. 31, 2013).
45
See Voon, supra note 43, at 204-205.

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tions or agreements with respect to matters within the competence of

the Organization. As the context imparts, “within the competence of
the Organization” and its ordinary meaning explain a limited scope of
authority that the assembly is allowed to restrictly be on a health re-
lated issue that shall become the gist of the agreement. The terms make
us understand that it is probably going too far to conclude that this
includes an interpretative function to explain trade related matter and
provision such specified in TRIPS.
Found in the same provision, apart from the subsection 3(a), the
VCLT further regulates other interpretative tools that are yet applicable
to the FCTC for purpose of interpretation. According to this issue, if
both parties in dispute adopt the FCTC provisions into their practice, it
is possibly that the FCTC can work as a subsequent practice (VCLT Ar-
ticle 31.3(b), or at least as a relevant rule of international law, pursuant
to the VCLT Article 31.3(c), defined by the International Law Commis-
sion46. However, viewing FCTC from the Article 31.3(c) perspective,
Prof. Tania Voon from Melbourne Law School likely sees some diffi-
culties of applying the provision. They are i) the concept or definition
of the relevant rules of international law47, and ii) the interpretation of
the term “between the parties”, that both subsections (a) and (c) share
in common. Despite of the fact that a relevant rule of international law
can work across international organizations, such as the FCTC under
WHO to the interpretation of TRIPS under WTO48, to precisely prove
46
“Relevant” means that the rules are on the same subject matter or that in any way affect
the specified interpretation. The term “international law” without adjective should denote
public international law, rather than private international law which is specified and under
the principle of conflict of laws. Further, the phrase “applicable in the relations between
the parties” supports that even treaty obligations are covered by Article 31 (3) (c). That
was a particularly important matter where one treaty had to be interpreted in the light of
other treaties binding on the parties. Moreover, this phrase should refer to parties to the
treaty that is being interpreted.
47
Sebastian Mantilla Blanco, the Interpretation of the WTO Agreement (2010),
at 16, available at http://www.javeriana.edu.co/juridicas/pub_rev/univ_est/
documents/4Interpretacion.pdf (last visited Jul. 29, 2013).
48
See Voon, supra note 27, at 205-206. “The uncertainty surrounding the scope of VCLT
Article 31(3)(c) need not pose a significant barrier to panels or the Appellate Body refer-
ring to the WHO FCTC in the course of resolving tobacco-related disputes, because Ar-
ticle 31(3)(c) does not provide the only means of referring to non-WTO law in the course
of interpretation…”; See also Panel Report EC-Measures Affecting the Approval and Mar-
keting of Biotech Products, 7.68, WT/DS291/R, WT/DS292/R, WT/DS293/R (Sept. 29,

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its legal basis, Sebastián Mantilla-Blanco, in his research paper of the

Interpretation of the WTO Agreement, has given four guidelines for
consideration. Saying, first, such rule by its nature, must be relevant for
the interpretation of any international regime. Second, the rule must be
applicable in the relations between the parties. Third, the relevance of
non-mandatory rules must be assessed on a case-by-case basis, bear-
ing in mind that their applicability to a specific relationship depends
on the objectively-ascertained intention of the parties. And forth, the
source of a rule will not affect its application in this context. As previ-
ously ruled by the Panel in EC-Biotech that the term “rules of interna-
tional law” as used in VCLT Article 31.3(c) is broad enough to cover all
general sources of international law49, then the second criteria seems
holding the key in order to decide whether the FCTC can be classified
as a relevant rule of international law beAccording to this issue, the
Panel in EC-Approval and Marketing of Biotech Products50 had previ-
ously suggested that “the parties” shall mean all the WTO Members,
such that only a treaty to which all WTO Members are party could be
counted as a rule of international law pursuant to VCLT Article 31.3(c).
As the trend shows in i) the US-Clove Cigarettes that somehow demon-
strates the correlation of FCTC and the WTO covered agreement, and
ii) the decision made by the Panel in EC-Approval and Marketing of
Biotech Products that somehow supports the use of FCTC for purpose
of interpretation51, together with iii) the recent opinions made by Pas-
cal Lamy, the Director-General of WTO and Dr. Margaret Chan, the
Director-General of WHO, confirming that WTO rules and the imple-
mentation of the FCTC are actually in line and in fact compatible52, the

2006) [hereinafter EC-Approval and Marketing of Biotech Products]. “we recognize that
a proper interpretation of the term “the parties” must also take account of the fact that
Article 31(3)(c) of the Vienna Convention is considered an expression of the “principle of
systematic integration”… in a multilateral context such as the WTO, when recourse is had
to a non-WTO rule for the purposes of interpreting provisions of the WTO agreements, a
delicate balance must be stuck…”.
49
See Blanco, supra note 46, at 111.
50
See EC- Approval and Marketing of Biotech Products Panel Report, supra note 47.
51
Id., 7.94. “the mere fact that one or more disputing parties are not parties to a convention
does not necessarily mean that a convention cannot shed light on the meaning and scope
of a treaty term to be interpreted”.
52
WHO Framework Convention on Tobacco Control, WTO Rules and the Implementa-
tion of the WHO FCTC are not incompatible (2011), available at http://www.who.int/fctc/

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multilateral instruments such as the FCTC can (or should) at least be

relevant to determine “ordinary meaning” of particular terms pursuant
to the VCLT Article 31.1 as of the same logic of applying GATT’s ne-
cessity test to the term “necessary” appeared elsewhere in other treaties.
This is regardless of any practice followed by the parties (if any) that
can possibly be amounted to “subsequent practice” by means of VCLT
Article 31.3(b).

IV. LEGAL ANALYSIS ON LEGITIMACY OF HEALTH WARN-

ING LABEL AND PLAIN PACKAGING REGULATIONS UN-
DER TRIPS
A. Health Warning Label Requirement and Plain-
Packaging Regulation on Tobacco
Under the Framework Convention on Tobacco Control, warning
label regulation is understood as a health warning requirement for
package of tobacco product which describes harmful effects of tobacco
use and regulated by competent national authority. Within different
jurisdictions and under different legal systems, the requirement of the
health warning label may be regulated in a different manner and level,
basing on national health policy specifically set by Member states that in
any case would deem legitimate as long as the standard in FCTC is met53.
Despite of the proportion of the warning label that the regulation may
require, there is a common form of pictorial warning and/or messages
imposed by WTO Members that can possibly amount to a restriction of
trademark use. In EU, according to the Directive adopted in 2001, the
label requirement mandates that the two most visible surface of every
cigarette package shall display a warning label at least 30 percent of
the most visible exterior. The proportion may be increased up to 35
percent if Members have official languages up to three54. Similar to the
FSPTCA of the US that requires top half of the front and rear panels of
wto_fctc/en/index.html (last visited Jun. 18, 2012).
53
FCTC art. 1(b)(i) provides: “(b) each unit packet and package of tobacco products and
any outside packaging and labelling of such products also carry health warnings describ-
ing the harmful effects of tobacco use, and may include other appropriate messages. These
warnings and messages: (i) shall be approved by the competent national authority…”
54
See Hackman, supra note 10, at 811-813.

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cigarette packs to contain one of the nine warnings, showing the risks
of smoking and a warning message, up to 70 percent of the warning
area55. While in Thailand, the Tobacco Products Control Act B.E.
2535 requires pictorial warning label at the proportion of 55 percent56.
Notwithstanding the percentage that each country’s law requires, the
regulations commonly limit the appearance of tobacco trademark that
may communicate to public and prevent owners from their use. Even
at this time when the plain packaging regulation was first introduced
in Australia, offering public a concrete form of a tighten measure that
steps beyond a simple health warning label to a smaller and stricter
scope by forcing the use of trademark (either via registration or use)
to be restricted in a single form of a plain, standard font, size, color
and identical design of word without device57, these bring a significant
question on legitimacy and compatibility of the regulations with the
international intellectual property obligations such as TRIPS.

B. Compatibility Of The Tobacco Measures With TRIPS

Among various arguments alleged by tobacco companies, criticisms
brought against tobacco measures, in the context of trademark, are
mostly and commonly on the claims of i) infringement and devaluation
of protected trademarks58, ii) denigration of trademark goodwill and
value through the use of pictorial warnings59, iii) expropriation of
property and private right by limiting their right to use60, and iv) its
incompatibility with the provisions of TRIPS, namely Article 15.4, 16,
55
Id., at 817-818.
56
See supra note 8, sec.12; See also Thailand’s Ministry of Public Health Notice of
Rules, Procedures, and Conditions for the Display and Content of Cigarette Labels (2009),
available at http://www.tobaccocontrollaws.org/files/live/Thailand/Thailand%20-%20
Cigarette%20Label%20Regs%202009.pdf (last visited Aug. 25, 2013).
57
See Vadi, supra note 3, at 96-97. “Plain packaging is a packaging regime that requires
the removal of colors, designs, and logos from cigarette packs while allowing the brand
name to be displayed in a standard font. Plain packaging is to reduce the incidence of
smoking by making cigarette packets less appealing. The Bill will require all cigarettes to
be sold in unattractive olive-green packs”; See also McGrady, supra note 29.
58
See Hackman, supra note 10, at 818-819.
59
See Vadi, supra note 3, at 106-107.
60
Sam Foster Halabi, International Trademark Protection and Global Public Health: A
Just-Compensation Regime for Expropriations and Regulatory Takings, 61 Cath. U. L.
Rev. 325 (2012), at 345.

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17, 20, and unjustification pursuant to Article 8.1. As the terms provided
in TRIPS are flexible and reserved for members’ implementation61,
TRIPS can thus be understood when the VCLT is brought to interpret
together with precedents ruled by Panel and AB that possibly guide
to a feasible solution may adopt by WTO62. To the extent that some
proponents view tobacco measures as a fair use exempted by Article
17, while opposers yet reject such argument, the following analysis
will therefore extract individual elements of the Articles, including
Article 15.4 and Article 20, and discuss all in details. With regards to
the challenge on the fair-use exception, Articles 16 and 17 of the TRIPS
provide:

TRIPS: Article 16 and 17

Art. 16.1 (Right Conferred) Art. 17

The owner of a registered trademark
shall have the exclusive right to prevent
all third parties not having the owner’s
consent from using in the course of trade
identical or similar signs for goods or
services which are identical or similar to
those in respect of which the trademark is
registered where such use would result in
a likelihood of confusion…
Members may provide limited exceptions
to the rights conferred by a trademark, such
as fair use of descriptive terms, provided
that such exceptions take account of the
legitimate interests of the owner of the
trademark and of third parties

To view the warning label and the plain package regulations as fair-
use, the conditions in Article 17 literally communicate the rule provid-
ing that the exception must be limited and be exception to the right
conferred. Without a right to protect, there is likely no exception would
be required. At the heart of the debate, the key would then underline
the ordinary meaning of the term “right conferred” in Article 16 and
61
TRIPS art.1.1 provides: “Members shall give effect to the provisions of this Agreement.
Members may, but shall not be obliged to, implement in their law more extensive protec-
tion than is required by this Agreement, provided that such protection does not contra-
vene the provisions of this Agreement. Members shall be free to determine the appropriate
method of implementing the provisions of this Agreement within their own legal system
and practice”.
62
See supra note 22.

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capture their correlation to form a holistic understanding. Simply, the

provision states that the owner of a registered trademark shall have the
exclusive right to prevent a third party to use identical/similar mark on
similar products that would likely cause confusion to consumers. It is a
matter of fact that the right granted is the right of exclusivity which its
nature can exemplify the negativity or negative right to exclude the use
of trademark by someone else. As positive right can easily understand
as the right to use, none of the provision in the article entitles tobacco
companies to protest or claim when their right is restricted (or limited)
for such a vital purpose like public health. Furthermore, as it was earlier
mentioned in the EC-Protection of Trademarks and Geographical Indi-
cations for Agricultural Products and Foodstuffs 63, the Panel noted that;
“The limited exceptions apply to the right conferred by a trade-
mark… Article 17 permits exceptions, to rights to exclude legitimate
competition, rather, they confer, inter alia, the right to prevent uses
that would result in a likelihood of confusion”
It can hence be argued that the claim earlier made by tobacco com-
panies is in no way compliance with the provisions in TRIPS. Whereby
TRIPS provides flexibility in implementation to Member states via Ar-
ticle 1.1, positive right (i.e. right to use) is de facto provided at a do-
mestic level during the process of national implementation64 rather than
in the international level. It then sounds unreasonable to claim that the
restriction of tobacco measures to use trademark would amount to a
violation of TRIPS. Added in support by the TRIPS’s preparatory work
in the light of VCLT Article 3265, the history also confirms our conclu-
63
Panel Report, EC-Protection of Trademarks and Geographical Indications for Agricul-
tural Products and Foodstuffs, 7.651, WT/DS290/R (Mar. 15, 2005)
64
For instance, rights i) to authorize other persons to use trademark [Section 20(1)(b)], ii)
to bring an action for infringement of trademark [Section 26(1)(b)], iii) to display trade-
mark on goods in respect of which the trademark is registered or on their packages or
containers [Section 26(1)(c)], v) to permit any person to apply trademark to goods [Sec-
tion 26(1)(f)], v) to assign a registered trademark [Section 106(1)] and etc., as literally
explain in the Australian Trademark Act 1995, though there is yet a dissent on the nature
of trademark right appeared in the high court of Australia (See JT International SA v.
Commonwealth of Australia and British American Tobacco Australasia Limited v. The
Commonwealth). Other countries’ trademark laws, such as Thailand, are also promulgated
in the same manner.
65
VCLT art. 32 provides: “Supplementary Means of Interpretation: Recourse may be had
to supplementary means of interpretation, including the preparatory work of the treaty and

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sion, provided that the content of Article 16.1 is the result of the second
phase of discussion, triggered by the EC proposal of the draft in 1990,
which its emphasis was initially on the negative right, the claim of the
tobacco companies is hence unpersuasive and also unreasonable.
As interest in using trademarks is deeply connected to its capability
of being distinguish goods of undertakings in the course of trade from
of others at the gist of the trademark law, acknowledged by the Panel’s
decision in EC-Protection of Trademarks and Geographical Indications
for Agricultural Products and Foodstuffs 66, trademarks can yet be ex-
pected to perform its function though tobacco measures are in force67.
This is because the word-mark68 is yet allowed to indicate and com-
municate to consumers of its origin in a specific form, now prescribed
by specific law, namely the warning label and the plain package. TRIPS
does not oblige WTO Members to provide trademark holders with a
right to use their marks69.
TRIPS: Article 2

the circumstances of its conclusion, in order to confirm the meaning resulting from the ap-
plication of Article 31, or to determine the meaning when the interpretation according to
Article 31: (a) Leaves the meaning ambiguous or obscure; or (b) Leads to a result which is
manifestly absurd or unreasonable”.
66
See supra note 62. “The TRIPS Agreement itself sets out a statement of what all WTO
Members consider adequate standards and principles concerning trademark protection. Al-
though it sets out standards for legal rights, it also provides guidance as to WTO Members’
shared understandings of the policies and norms relevant to trademarks and, hence, what
might be the legitimate interests of trademark owners. The function of trademarks can be
understood by references to Article 15.1 as distinguishing goods and services of undertak-
ings in the course of trade. Every trademark owner has a legitimate interest in preserving
the distinctiveness, or capacity to distinguish, of its trademark so that it can perform that
function. This includes its interest in using its own trademark in connection with the rel-
evant goods and services of its own and authorized undertakings. Taking account of that
legitimate interest will also take account of the trademark owner’s interest in the economic
value of its mark arising from the reputation that it enjoys and the quality that it denotes”.
67
See general Halabi, supra note 59.
68
There are generally two types of trademarks, namely i) word marks (i.e. the characters
comprising the name of a brand) and ii) non-word marks (i.e. device, figurative or stylized
marks) such as logos and combined marks containing stylized letters, shape marks and
color marks. Some may refer to this non-word mark as a device mark. Please take Marl-
boro, a famous mark of tobacco products, as an example.
69
See EC-Protection of Trademarks and Geographical Indications for Agricultural Prod-
ucts and Foodstuffs Panel Report, supra note 62, para.7.610-7.611; See also McGrady,
supra note 29.

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Interpretative Tool
Art. 20
VCLT Art.31.1

The use of trademark in the Ordinary Meaning:

course of trade shall not be
unjustifiably encumbered by 1. There is a special requirement(s)
special requirements, such as
use with another trademark, 2. Such requirement is related to the course
use in a special form or use of trade
in a manner detrimental to
3. Such requirement must be unjustifiably
its capacity to distinguish
(unjustified)
the goods or services of one
undertaking from those of 4. There is encumbrance arisen from such
other undertakings… requirement

5. Encumbrance is to the use of mark

Notwithstanding the exclusive right provided by TRIPS, the Agree-

ment further recognizes trademark as a private right in paragraph four
of its Preamble70. It is an affirmation of capitalistic principle that is
translated into Article 2071 and aim to outlaw special requirement mak-
ing use of trademark difficult in the course of trade and to save owners
from unjustified encumbrances. As touched many times by commenta-
tors in their research, Article 20 likely provides a strongest opposition
for tobacco companies to be against tobacco measures as its character
appears to be within scope of the Article 20. Found in the article, the
law requires a numbers of proof to show that i) there is a special re-
quirement imposed, ii) the requirement imposed is related to the course
of trade, iii) what imposed in the course of trade is unjustified, iv) such
unjustified requirement causes encumbrance, and v) that encumbrance
influences the use of mark. “Requirement”, per its wording, is referring
to the act of demand, requisition, or requiring. While “encumbrance”

70
See supra note 18.
71
Nuno Pires de Carvalho, The TRIPS Regime of Trademarks and Designs, 89
(1993), at 45.

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would mean an obstruction that impedes or a burden72, the entire provi-

sion thus gives us an understanding that Article 20 shall denote a “spe-
cial” demand or requirement, but not voluntariness73, in a sense that
a trademark use in the course of trade will be prohibited or restricted
and finally causes obstruction to trademark owners. To the extent that
the warning label and plain packaging regulations restrict the use of
trademarks in various formats prescribed by laws, it seems reasonable
to conclude that Article 20 would likely apply to both the measures that
prevent trademark from performing their functions.
Now turning us to the consideration of “unjustification” last men-
tioned in the article, “justified”, according to Wordnet dictionary, means
to show or prove to be just, right or reasonable. So, to be seen as “just”,
there must be a goal to be pursued. At least those that are prohibited
under GATT should not be considered legitimate or “just”74 in pursuit
of the law. The AB, in Brazil-Measures Affecting Imports of Retreaded
Tyres75, has mentioned that discrimination would be arbitrary or unjus-
tifiably when i) the reasons given for discrimination bear no rational
connection to the objective falling within the purview of a paragraph
of Article XX, or ii) would go against that objective. Thus, in order to
conclude whether the tobacco measures are unjustifiable, there must
first be i) a public health policy and objective of invoking state that fall
within GATT Article XX(b)76 and ii) also a proof that the measures can
achieve such goal.
72
See generally Wordnet dictionary
73
See Panel Report, Indonesia-Certain Measures Affecting the Automobile Industry,
14.278, WT/DS54/R (Jul. 2, 1998).
74
Nuno Pires de Carvalho, The TRIPS Regime of Trademarks and Designs, 89 (1993),
at 329.
75
Appellate Body Report, Brazil-Measures Affecting Imports of Retreaded Tyres, 227,
WT/DS332/AB/R (Dec. 3, 2007).
76
General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement
Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS: THE RE-
SULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS
17 (1999), 1867 U.N.T.S. 187, 33 I.L.M. 1153 (1994) [hereinafter GATT 1994] art. XX(b)
provides: “Subject to the requirement that such measures are not applied in a manner
which would constitute a means of arbitrary or unjustifiable discrimination between coun-
tries where the same conditions prevail, or a disguised restriction on international trade,
nothing in this Agreement shall be construed to prevent the adoption or enforcement by
any contracting party of measures: …(b) necessary to protect human, animal or plant life
or health…”.

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For long that justification has been treated as close to the necessity
test in many WTO case law77, this may imply a requirement of applying
the test in the proof of justification according to TRIPS Article 20, in
the light of the GATT, due to the WTO dispute procedure78. In the con-
text of Australia, for example, the objectives of adopting the warning
label requirement is to i) increase consumer knowledge of health effects
relating to smoking and ii) to encourage the cessation of smoking and
to discourage uptake or relapse, along with a number of requirements
specified in the Trade Practice (Consumer Product Information Stan-
dards) (Tobacco) Regulations 2004. The measure is viewed, at least,
not against its objectives and likely consistent. It is deemed justifiable
according to the above interpretation with support from the case law.
While the plain package, the objectives set out in Section 3 of the To-
bacco Plain Packaging Act 201179 is broad enough to possibly conclude
that the measure undertaken is also consistent (emphasis added). Likely,
the measure requirements related to public policy objective are usually
recognized and accepted to be justifiable (emphasis added) 80. Though
there is a number of scholars and researchers in support this notion81,
this paper argues that it is not always the case. Based on the VCLT Ar-
77
See Daniel Gervais, Analysis of the Compatibility of certain Tobacco Product Packag-
ing Rules with the TRIPS Agreement and the Paris Convention (2010), at 29, available at
http://www.smoke-free.ca/trade-and-tobacco/Resources/Gervais.pdf (last visited Aug. 26,
2013).
78
Id., at 28.
79
See supra note 27, sec. 3 provides: “Objects of this Act, (1) The objects of this Act
are:(a) to improve public health by:(i) discouraging people from taking up smoking, or
using tobacco products; and (ii) encouraging people to give up smoking, and to stop using
tobacco products; and (iii) discouraging people who have given up smoking, or who have
stopped using tobacco products, from relapsing; and (iv) reducing people’s exposure to
smoke from tobacco products; and (b) to give effect to certain obligations that Australia
has as a party to the Convention on Tobacco Control.
(2) It is the intention of the Parliament to contribute to achieving the objects in subsection
(1) by regulating the retail packaging and appearance of tobacco products in order to:(a)
reduce the appeal of tobacco products to consumers; and (b) increase the effectiveness of
health warnings on the retail packaging of tobacco products; and (c) reduce the ability of
the retail packaging of tobacco products to mislead consumers about the harmful effects of
smoking or using tobacco products”.
80
See Carvalho, supra note 73, at 330; See also Alberto Alemanno and Enrico Bonadio,
Do you Mind My Smoking? Plain Packaging of Cigarettes under the TRIPS Agreement, 10
J. Marshall Rev. Intell. Prop. L. 450 (2011), at 464-465.
81
Id.

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ticle 31.1, to make our interpretation entirely and holistically coherent,

it is worth noting that interpretation should also be consistent with the
principle provision in TRIPS Article 8. The provision reads :

Art. 8.1 (Principles)

Members may, in formulating or amending their laws and regulations, adopted

measures necessary to protect public health and nutrition, and to promote the public
interest in sectors of vital importance to their socio-economic and technological
development, provided that such measures are consistent with the provisions of
this Agreement

Rather than overriding Members’ obligations82, Article 8 likely

works to interpret and mirror the main purpose of balancing the right
to promote public interest in sectors of vital importance to their socio-
economic and technological development, provided that such measures
are consistent with the provisions in TRIPS. With regards to this issue,
Member states can adopt measures to protect public health and nutrition
as long as it is “necessary” 83. As the term used in Article 8.1 is different
to the term used in the Article 20, by viewing the term on as-is basis, it
can be reasonably expected that the standard of proving or threshold of
justifiability should therefore be lower than the threshold of the neces-
sity test84. Similar to the AB’s decision in Brazil-Measures Affecting
Imports of Retreaded Tyres, the invoking Member would then need to
demonstrate a genuine relationship of ends and means between the ob-
jective pursued and the measures at issue, such that the measure brings
about a material contribution to achieve its objective85. A Member may
also demonstrate this through evidence of a qualitative or quantitative
nature, given that no set requirements on the type of evidence that a
Member must have to support implementation of a measure and a mem-
ber needs not prove that the measure will be effective in achieving its

82
See Gervais, supra note 76, at 17.
83
See supra note 75.
84
See McGrady, supra note 29, at 4.
85
See supra note 74, para. 145.

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objective because it can only be evaluated with the benefit of time86.

To prove “necessary”, Panel and AB have previously ruled in the
two important cases which set standard in their precedents. Here, US-
Standard for Reformulated and Conventional Gasoline in 1996 (Panel)
and US-Import Prohibition of Certain Shrimp and Shrimp Products in
1998 (AB), both have sum up the three major elements to qualify “neces-
sary”. That to be said, in order to be necessary, i) there must be a policy
in respect of the measure designed to protect public health, ii) there is
correlation between the measure and policy objective that is necessary
to fulfill, and iii) such measure is the only way to accomplish the policy,
given that no other less restrictive measure than the one intended. Thus,
while there is no common statistical information confirms efficiency of
tobacco measures, especially the plain-packaging, towards tobacco con-
sumption87, this paper found it difficult to conclude that the plain packag-
ing regulation, in particular, would then be justifiable unless the objective
in public health is set at the maximum as to protect the entire nation from
being in touch with tobacco. To the extent that this research argues that
impacts resulted from the plain package on trademark use will likely be
tremendous88, by comparing to the case EC-Measures Affecting Asbes-
tos and Asbestos-Containing Products89, it is still possible that the plain
packaging regulation can yet amount to the term necessary and justifiable
subject to Article 20 in the light of the TRIPS’s principle in Article 8.
Supported by the Panel’s decision in European Communities I90 and the
latter case of Thai Cigarette in 199091, the level of public policy objective
is therefore left up to Members to decide.
86
Id., para 151.
87
See Gervais, supra note 76, at 27.
88
See C. The Stricter, the Better? Impacts on Trademark System in Practice
89
Appellate Body Report, European Communities - Measures Affecting Asbestos and As-
bestos-Containing Products, WT/DS135/AB/R (Mar. 12, 2001) [hereinafter EC-Measures
Affecting Asbestos and Asbestos-Containing Products]; Panel Report, European Com-
munities - Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R
(Sep. 18, 2000).
90
See Carvalho, supra note 73, at 190. “…paragraph one of Article 8 reflects the fact that
the TRIPS Agreement does not generally provide for the grant of positive rights to exploit
for use certain subject matter, but rather provides for the grant of negative rights to prevent
certain acts. This fundamental feature of IP protection inherently grants Members freedom
to pursue legitimate public policy objectives…”.
91
See supra note 9.

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V. THE STRICTER, THE BETTER? IMPACTS ON TRADE-

MARK SYSTEM IN PRACTICE
Though the balance can be maintained via interpretative tool such
as ordinary meaning, object and purpose, and subsequent agreement,
i.e. the Doha Declaration, that recently confirmed in the US-Clove Cig-
arettes, it does not change the fact that there are likely impacts result-
ed from the imposition of tobacco measures. At this point of problem
where general research hardly touched on, as the use of trademark on
tobacco in the context of plain package is now limited to only the plain
text, while devices and figures are required to be taken down, the limita-
tion thus raises a number of questions to courts, government registrars
and IP lawyers on how the measures are supposed to work in conjunc-
tion with current practice where the fact of “trademark use” (as opposed
to non-use) is very much important.

1. Trademark Use: Acquisition of Trademark Protection (Via Use)

Trademark use has long been acknowledged and recognized in
trademark law of its vital function on distinctiveness that relates to con-
sumers’ capability of distinguishing source or origin of products. In the
context of trademark acquisition, many civil law system and almost
Anglo-American common law countries give trademark protection
through the use of a mark if it is capable of distinguishing one’s source
of product from others92. To the extent that the use of trademark is now
limited as the result of the plain packaging regulation, distinctiveness
is expected to be hard for marks’ owners to establish, through the use
of plain text without figures or devices, that would create brand image
in minds of consumers. Especially for tobacco product which its ad-
vertising is prohibited in many countries’ laws, brand image will likely
require a longer time and effort until a mark will become distinguish-
able. Possibly that a mark being limited by force of the health warning
label will also face the same dilemma, the problem in this case will be
very less severe comparing to the plain package as its word marks can
nonetheless indicate and communicate to consumers its origin. Though
the plain packaging measure may be considered legitimate as explained
in the previous chapter, the impact to the acquisition of trademark pro-
92
See Gervais, supra note 76, at 16.

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tection via use is yet another issue which is a big question to users and
also legislators to dwell.

2. Trademark Use: Registration of a New Mark and Trademark

Infringement (Likelihood of Confusion)
Another issue related to trademark use is the analysis on the level of
similarity appeared in most of the countries’ trademark registration. In
case where a mark in application is consisted of both wording and de-
vice, analysis or consideration of a trademark registrar on similarity of
the two marks will generally be on the mark entirely comparing to the
previous ones registered (emphasis added). As the use of a registered
trademark relating to tobacco will now be limited and different from
what they formerly registered with IP office, the question will then be
how a registrar and court will scrutinize the similarity. While there is
much uncertainty under the current system, it is foreseeably that the
solution may base on two different approaches.
First, “as-is” basis, according to this approach, registrars may scru-
tinize similarity of the two marks basing on documents and samples of
the marks provided without taking the fact of actual use into account.
However, as the trademark use is undeniably related to the scope of
protection and public’s likelihood of confusion, the actual use will then,
to some extent, influence the scrutiny in registrars’ minds, causing them
to possibly switch to the second approach where the consideration will
base on the use of plain text in the case of plain package. According to
TRIPS Article 15.4, this will likely pose a further question on legiti-
macy of using the registrars’ discretion, the provision reads;

TRIPS: Article 15.4

Art. 15.4 (Protectable Subject Matter)

The nature of the goods or services to which a trademark is to be applied shall in
no case form an obstacle to registration of the trademark

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This paper argues that registrars will likely encounter difficulty of

implementing the second approach, provided that the discretion on
comparing the similarity will likely be in violation of Article 15.4 of
the TRIPS. This is because the focus of comparison is now on the na-
ture of tobacco product. Very much likely that registrars will choose the
“as-is” basis approach, fraudulent applicant may take advantage from
this weakness by creating a mark with fancy device and stylized word-
ing with different spelling and sound, i.e. Marlboro vs. Morlbare, as to
deceive public in terms of origin or source of product that will generally
amount to trademark infringement. As such mark, in comparison to the
registered mark, would be deemed different on its sound and device but
similar in spelling, the all-combined deception, which may entirely ap-
pear to be sufficiently distinctive, may cause likelihood of confusion to
public once it is accepted for registration and used on tobacco product
by force of the plain packaging regulation. Will this later case amount
to infringement of the Marlboro trademark as it would likely cause con-
fusion to consumers and mislead public?
Another example that would cause problem on trademark is a gener-
ic mark whereby its protection and distinctiveness can acquire through
a combination of stylized wording and devices. When these are all com-
bined together, registrar will usually require an applicant to disclaim on
the generic word partially form and contribute as the whole registered
trademark. As its right of protection will be limited and scoped on any
device and/or components forming an entire registered mark, once it is
registered and applied on a plain package of tobacco, it is hard to imag-
ine how the registrar and court will deal with the situation in practice
when merely an generic word is now appeared on tobacco product by
force of the plain packaging law. Though the provisions are consid-
ered legitimate and compatible with the TRIPS, the problem is hard
to imagine and the refusal of a registrar for trademark registration will
also likely amount to the violation of TRIPS Article 15.4. Similar to our
previous analysis, the problem is yet remained to be seen and suggests
Members to beware if they intend to apply the regulation in the future93.

93
Currently, United Kingdom and New Zealand are considering of adopting tobacco plain
packaging regulation to control tobacco product distributed in the countries; See Voon,
supra note 5, at 118.

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3. Trademark Use: Cancellation of Trademark (Non-Use)

In many countries’ national trademark laws, non-use of a registered
trademark may cause cancellation or revocation as trademark is recog-
nized by Paris Convention as industrial property protected for business
purpose. Because of some components of a registered mark that must
be taken down and leave the use to merely on a plain word, question
regarding non-use of components is then arisen if this amounts to a
cancellation. Regarding this particular issue, Australian Tobacco Plain
Packaging Act, explicitly regulates that non-use of a trademark for the
purpose of complying with the Act does not provide a basis for revok-
ing or refusing to register 94. To the extent that this exception clause
applies to both i) revocation of trademark and ii) refusal to register a
trademark based on the reason of non-use , the correlation of this Act
to the Australian trademark law seems to provide a compromising so-
lution to the problem on cancellation but unlikely to the problem on
registration of trademark. Only in the situation where trademark use
is a pre-condition to apply or file for trademark registration that this
clause would benefit, without devices or other compositions, such ex-
ception would not change the fact that distinctiveness and brand image
are yet difficult to be created to acquire protection via use in minds
of consumers. Similar to the second problem on registration of a new
mark explained above, this exception clause is seen having limitation
on its scope in implementation. Likely, the health warning label owns
a lesser number of problems in comparison with the plain package im-
posed by Australia. So, will the stricter regulation always be better? By
taking these impacts on trademark practice into account, whereas the
effectiveness of the regulation is yet suspicious, these may second the
implementing country to re-estimate the measure before adopting radi-

94
See supra note 27, sec. 28(3) provides: “To avoid doubt, for the purposes of sections
38 and 84A of the
Trade Marks Act 1995, and regulations 17A.27 and 17A.42A of the Trade Marks Regula-
tions 1995: (a) the operation of this Act; or (b) the circumstance that a person is prevented,
by or under this Act, from using a trade mark on or in relation to the retail packaging of
tobacco products, or on tobacco products; are not circumstances that make it reasonable
or appropriate: (c) not to register the trade mark; or (d) to revoke the acceptance of an
application for registration of the trade mark; or (e) to register the trade mark subject to
conditions or limitations; or (f) to revoke the registration of the trade mark”.

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cal approach on tobacco control such as the plan package. This is unless
the national trademark system is entirely reformed and adjusted for its
full implementation.

4. Trademark Use: The Use of Misleading Word

As the result of tobacco measures, there is also a claim that restric-
tion of the use of trademark will amount to limitation on the use of
components incorporated into a cigarette name, such as “mild”, “light”,
and “ultra-light” descriptors commonly seen in market, that are legiti-
mate and available95. To our notice that tobacco manufacturers and
their affiliated advertisers have strategies to frame the information on
its package, including the shape and size of the package by using such
descriptors96, to create credence qualities in products through design
suggestion and implication to make consumers believed that smoking a
“mild” cigarette, for example, constitutes a positive health measure97,
it is also questionable if such restriction will constitute a trademark in-
fringement98.
Looking the problem from international law perspective, through
the use of TRIPS Article 1.1 and Article 2.199 and Article 6quinquies of
the Paris Convention100, the misleading representations can actually be

95
See Vadi, supra note 3, at 105-106. “Tobacco company usually claims that the terms
“light”, “mild”, and “low” were incorporated into cigarette names and communicated dif-
ferences of taste to consumers and such banning would not only destroy valuable trade-
marks and the goods that they represent but would also tantamount to indirect expropria-
tion”.
96
See Halabi, supra note 59, at 350-351.
97
Id., at 353-355.
98
See Vadi, supra note 3, at 123-124.
99
TRIPS art.2 provides: “In respect of Parts II, III and IV of this Agreement, Members
shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967)”.
100
Paris Convention for the Protection of Industrial Property of 1883, 25 Stat. 1372, T.S.
No. 379, 10 Martens Nouveau Recueil 2d 133, revised Dec. 14, 1900, 32 Stat. 1936, T.S.
No. 411, 30 Martens Nouveau Recueil 2d 465, revised June 2, 1911, 38 Stat. 1645, T.S.
No. 579, 8 Martens Nouveau Recueil 3d 760, revised Nov. 6, 1925, 47 Stat. 1789, T.S.
No. 834, 74 L.N.T.S. 289, revised June 2, 1934, 53 Stat. 1748, T.S. No. 941, 192 L.N.T.S.
17, revised Oct. 31, 1958, 13 U.S.T. 1, T.I.A.S. No. 4931, 828 U.N.T.S. 107, revised July
14, 1967, 21 U.S.T. 1583, T.I.A.S. No. 6923, 828 U.N.T.S. 305 [hereinafter Paris Con-
vention] art. 6quinquies.B provides: “Trademarks covered by this Article may be neither
denied registration nor invalidated except in the following cases: (i) when they are of such

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rejected by law as it is likely contrary to public order. Particularly in this

issue, there are scholars, through their research, proposed “ex-ante” and
“ex-post” approaches to prevent such unpleasant dilemma 101. To our
notice that only the ex-ante approach that is relevant to our problem of
the misleading representation102, this paper argues that legislation can
thus be used to pose additional requirements of trademark eligibility to
prevent the problem as long as it does not conflict or violate provisions
in TRIPS, namely Articles 15.4 and 20 and by means of Paris Conven-
tion Article 6quinquies. By taking Australian Trademark Law103 and
the US’s104, as an example, restriction on the use of misleading words
or waiver of the claim of protection can actually be done by excluding
them from incorporating in a trademark. This thus rebuts the argument
of tobacco companies on the ground of legitimacy. Supported by medi-
cal evidence which shows that smokers would likely adopt a “light”
version of a cigarette as a health measure, often as an alternative to quit
smoking105, the current mechanism can therefore provide a perfect so-
lution to the current problem resulted from tobacco measures.

VI. CONCLUSION
The battle and claims of tobacco companies against health warn-
ing label and plain packaging regulations adopted in many countries
have highlighted some significant issues concerning TRIPS that we
have overlooked for many years. Many problems argued by tobacco

a nature as to infringe rights acquired by third parties in the country where protection is
claimed; (ii) when they are devoid of any distinctive character, …or have become custom-
ary in the current language or in the bona fide and established practices of the trade of the
country where protection is claimed; (iii) when they are contrary to morality or public
order and, in particular, of such a nature as to deceive the public…”.
101
See general Halabi, supra note 59.
102
Id., at 356-357. The ex-post approach was recently proposed by Prof. Sam Foster
Halabi, College of Law, University of Tulsa.
103
Australia Trademarks Act 1995, sec. 43 provides: “An application for the registration
of a trademark in respect of particular goods or services must be rejected if, because of
some connotation that the trademark or a sign contained in the trademark has, the use of
the trademark in relation to those goods or services would be likely to deceive or cause
confusion”.
104
See Halabi, supra note 59, at 369-370.
105
Id., at 370-371.

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companies are unlikely found in the contents of the TRIPS as priority

of WTO Members in their early negotiation was on the bargain in patent
provisions and the drafters’ willingness to leave it opened for purpose
of flexibility.
To provide analyzing steps to rely on, the Vienna Convention on the
Law of Treaties or VCLT is necessary to be used to project the gist of
the TRIPS and reveal the results of the Members’ negotiations. Among
the eighty five provisions, Articles 31 and 32 are very likely relevant
to our understanding of the provisions in TRIPS by relying on its or-
dinary meaning in the light of its object and purpose. Together with
previous decisions ruled by the DSB, the analysis revealed that among
other claims, problems are mostly clustered on Articles 15.4, 16, 17 and
20, which is deeply connected to interpretation of justification and ne-
cessity under TRIPS Article 8.1. While the tobacco measures are seen
falling under the scope of Article 20 provision, both regulations are
likely found legitimate, justified, and compatible with TRIPS principle
ruled in Article 8.1 as well as the Doha Declaration and the FCTC106
with support from the DSB’s precedents and TRIPS’s history found in
its preparatory works. Moreover, as the provision of TRIPS Article 16
is related to negative right, constituted as the right conferred of trade-
mark holders, and while the tobacco measures under consideration are
not an exception to the right conferred specified thereof, the measures
are therefore considered not in violation of the TRIPS in both Article
16 and 17, as well as Article 15.4 that is regulated to merely prohibit
discrimination on goods basing on nature that will form obstacles to
trademark registration.
Trademark, unlike copyright and patent, is not intendedly protected
to reward trademark creation but rather, it tires to the benefits mutually
shared by manufacturers and also consumers. In review of the gist, i)
the enhancement of fair competition, as to distinguish one’s source or
origin of product (emphasis added) from competitors, and ii) reduction
of consumers’ confusion and information cost are what the law mostly
and profoundly emphasizes on107. Because the trademark law is origi-

106
See Section IV: Legal Analysis on Legitimacy of Health Warning Label and Plain Pack-
aging Regulations under TRIPS, B. Compatibility of the Tobacco Measures with TRIPS.
107
See Halabi, supra note 59, at 365-366.

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nally created to prevent consumers’ confusion and to provide fair com-

petition in market, as the result of the tobacco measures, trademarks’
capability of distinguishing origin or source of product is yet observed
to remain though it is transformed into a form of a plain package or
restricted in its size because of the health warning label requirement.
Unless opposers can provide evidence showing that consumers will
likely switch their consumption to a competing or like product in the
same market, the measures would likely be considered legitimate and
compatible to TRIPS where trademark distinctiveness is yet existed and
subject to protection by virtue of the trademark law108.
Notwithstanding the tobacco measures’ legitimacy and compatibil-
ity to TRIPS, this paper argues that there shall also be some impacts
resulted from the restriction of trademark use that would likely affect
trademark system in practice. Based on the fact that trademark acqui-
sition, either via registration or use, trademark infringement and also
trademark revocation, are all relying on the actual use of a trademark,
discretion and standard of the courts and registrars in their consider-
ation of trademark acquisition, revocation, and infringement will also
likely be changed in response to the development of tobacco control
measure.
Rather to call for Members’ attention on the impacts, it is not the ob-
jective of this paper to oppose any radical implementation of any pub-
lic health measure or to be against the regulations which aim to bring
healthier population and stronger development in Member countries.
To fully implement public health policy in the WTO Member states
without violating both international and national trademark laws, Mem-
bers are urged and encouraged to harmonize the systems with holistic
approach, aiming to facilitate domestic health and the flow in trade si-
multaneously, in order to form a strong and balanced system to benefit
right holders and also users. As previously observed through the use of
Section 28 in Australian Tobacco Plain Packaging Act, though the pro-
vision is reserved to be further interpreted, the law is considered to be
a good beginning of founding a harmonized system of trade and IP that
other Member states can take into account. Among different approaches
of tobacco measures such as the plain package and the public health
108
See Vadi, supra note 3, at 122-124.

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warning label, countries may choose either a stricter or more flexible

measure to implement. This is together with the number of unavoidable
impacts that the Members shall always bear in mind.

References
Books:
McGrady, Benn (2011), Trade and Public Health: The WTO, Tobacco, Alcohol, and
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Pires de Carvalho, Nuno (1993), The TRIPS Regime of Trademarks and Designs.
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Tingsamij, Wat (2002), Explanation of Trademark Law.
World Trade Organization (2010), 18 Dispute Settlement Reports 2008.

Articles:
Alemanno, Alberto and Bonadio, Enrico (2011), Do you Mind My Smoking? Plain
Packaging of Cigarettes under the TRIPS Agreement, 10 J. Marshall Rev.
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Blanco, Sebastian (2010), the Interpretation of the WTO Agreement, http://www.
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Pharmaceutical Patents, 7 Asian J. WTO & Int’l Health L. & Pol’y 225.
Vadi, Valentina (2012), Global Health Governance at a Crossroads: Trademark
Protection v. Tobacco Control in International Investment Law, 48 Stan. J.
Int’l L. 93

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 The Controversy of Trade in Tobacco and Protection of Public Health,

Vateesatokit, P., Hughes, B. and Ritthphakdee, B. (2000), Thailand: Winning Battles,

but the War’s Far from Over, http://bmj-tobacco.highwire.org/content/9/2/122.
full.
Voon, Tania (2013), Acquisition of Intellectual Property Rights: Australia’s Plain
Tobacco Packaging Dispute, E.I.P.R. 2013, 35(2), 113-118.
Voon, Tania (2013), Flexibilities in WTO Law to Support Tobacco Control Regulation,
39 Am. J.L. & Med. 199.
Voon, Tania (2012), Note on WTO Appellate Body Report in US-Measures Affecting
the Production and Sale of Clove Cigarettes, http://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2143804.

Cases:
Appellate Body Report, Brazil-Measures Affecting Imports of Retreaded Tyres, 227,
WT/DS332/AB/R (Dec. 3, 2007).
Appellate Body Report, European Communities - Measures Affecting Asbestos and
Asbestos-Containing Products, WT/DS135/AB/R (Mar. 12, 2001).
Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural
Chemical Products, 45, WT/DS50/AB/R (Dec. 19, 1997).
Appellate Body Report, United States – Standards for Reformulated and Conventional
Gasoline, WT/DS2/AB/R (Apr. 29, 1996).
Panel Report, European Communities-Measures Affecting the Approval and Marketing
of Biotech Products, 7.68, WT/DS291/R, WT/DS292/R, WT/DS293/R (Sept.
29, 2006).
Panel Report, European Communities - Measures Affecting Asbestos and Asbestos-
Containing Products, WT/DS135/R (Sep. 18, 2000).
Panel Report, European Communities -Protection of Trademarks and Geographical
Indications for Agricultural Products and Foodstuffs, 7.651, WT/DS290/R
(Mar. 15, 2005).
Panel Report, India – Patent Protection for Pharmaceutical and Agricultural
Chemical Products, WT/DS50/R (Sept. 5, 1997).
Panel Report, Indonesia-Certain Measures Affecting the Automobile Industry, 14.278,
WT/DS54/R (Jul. 2, 1998).
Panel Report, Thailand-Restriction on Importation of Internal Taxes on Cigarettes,
BISD/37/S/200 (Nov. 7, 1990).

Treaties:
Agreement on Trade Related Aspects of Intellectual Property Rights, Apr. 15, 1994,
Marrakesh Agreement Establishing the World Trade Organization, Annex 1C,
The Legal Texts: The Results Of The Uruguay Round Of Multilateral Trade
Negotiations 320 (1999), 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994).
General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement
Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS:
THE RESULTS OF THE URUGUAY ROUND OF MULTILATERAL
TRADE NEGOTIATIONS 17 (1999), 1867 U.N.T.S. 187, 33 I.L.M. 1153

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(1994).
Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994,
The Legal Texts: The Results Of The Uruguay Round Of Multilateral Trade
Negotiations 4 (1999), 1867 U.N.T.S. 154, 33 I.L.M. 1144 (1994).
Paris Convention for the Protection of Industrial Property of 1883, 25 Stat. 1372,
T.S. No. 379, 10 Martens Nouveau Recueil 2d 133, revised Dec. 14, 1900, 32
Stat. 1936, T.S. No. 411, 30 Martens Nouveau Recueil 2d 465, revised June 2,
1911, 38 Stat. 1645, T.S. No. 579, 8 Martens Nouveau Recueil 3d 760, revised
Nov. 6, 1925, 47 Stat. 1789, T.S. No. 834, 74 L.N.T.S. 289, revised June 2,
1934, 53 Stat. 1748, T.S. No. 941, 192 L.N.T.S. 17, revised Oct. 31, 1958,
13 U.S.T. 1, T.I.A.S. No. 4931, 828 U.N.T.S. 107, revised July 14, 1967, 21
U.S.T. 1583, T.I.A.S. No. 6923, 828 U.N.T.S. 305.
Understanding on Rules and Procedures Governing the Settlement of Disputes,
Marrakesh Agreement Establishing the World Trade Organization, Annex 2,
The Legal Texts: The Results Of The Uruguay Round Of Multilateral Trade
Negotiations 354 (1999), 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994).
Vienna Convention on the Law of Treaties, 1155 U.N.T.S 331, 8 I.L.M. 679.
World Health Organization Constitution, 14 U.N.T.S 185 (1948).
World Health Organization Constitution, WHO Framework Convention on Tobacco
Control, May 21, 2003, 42 I.L.M. 518 (2003).

WTO/Health-related Documents:
Ministerial Conference, European Communities – The ACP-EC Partnership
Agreement, WT/MIN(01)/15 (Nov. 14, 2001), http://www.wto.org/english/
thewto_e/minist_e/min01_e/mindecl_acp_ec_agre_e.pdf.
Thailand’s Ministry of Public Health, Notice of Rules, Procedures, and Conditions
for the Display and Content of Cigarette Labels (2009), http://www.
tobaccocontrollaws.org/files/live/Thailand/Thailand%20-%20Cigarette%20
Label%20Regs%202009.pdf.
WHO Framework Convention on Tobacco Control, WTO Rules and the Implementation
of the WHO FCTC are not incompatible (2011), http://www.who.int/fctc/
wto_fctc/en/index.html.

Working Papers, Internet, and Other Sources:

Stevens, Trevor (2011), Tobacco Plain Packaging Reforms: What They Mean to
Australian Trademark Law and our International Obligation, http://www.
davies.com.au/pub/detail/501/tobacco-plain-packaging-reforms-what-they-
mean-for-australian-trade-mark-law-and-our-international-obligations.
Wikipedia, the Free Encyclopedia, World Health Organization Framework
Convention on Tobacco Control, http://en.wikipedia.org/wiki/World_Health_
Organization_Framework_Convention_on_Tobacco_Control.

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