Many tobacco users also favour tax hikes as they want to get rid of their habit

As it prepares for the next Budget, the Union Government will be looking for ways to generate more revenues to heal the economy battered by Covid-19. But it must ensure that its moves do not add to the woes of the common man already reeling under Covid-induced health worries, inflation and skyrocketing prices of essential commodities in the face of salary cuts and widespread job losses.

In such a gloomy scenario, one of the areas which the Government can explore is enhancing tax on ‘sin products’ — cigarettes, e-cigarettes, cigars and smokeless tobacco churned out by the tobacco giants blatantly at the cost of lives of the youth. This also puts a burden on the economy.

The tobacco industry has been since 2017 — when GST came into effect — enjoying almost an extended tax-free season. Post GST, there has been no major hike in tax on any of the tobacco products for the last four years, making tobacco products in India more affordable to the common man.

In India, the tax burden on bidis, cigarettes, and smokeless tobacco, on an average, stands at 22 per cent, 53 per cent, and 64 per cent respectively in 2021, while the World Health Organization (WHO) recommends a uniform tax of at least 75 per cent for each tobacco product. Clearly, we are much below the WHO-recommended tax slab.

Use of tobacco is known to be the cause of several non-communicable diseases (NCDs) such as cancer, cardiovascular disease, diabetes, and chronic lung diseases. In India, annually around 13 lakh deaths are attributable to tobacco consumption. India also bears an annual economic cost of over Rs 1,77,000 crore spent by people for treating diseases caused by tobacco as well as the monetary value of premature death due to the consumption of tobacco. It accounts for more than one per cent of India’s GDP. Economic burden due to bidi consumption is also estimated to be Rs 80,000 crore. This burden is likely to increase enormously in the near future as tobacco consumers have a higher risk of contracting coronavirus infection.

Over 28 per cent of adults above 15 years and 8.5 per cent of students aged 13-15 years use tobacco in some form or the other which makes India the second largest consumer of tobacco in the world. Experts have confirmed that smokers are more likely to develop severe symptoms or die from Covid infection, as it primarily attacks the lungs.

Hence, if taxes are not hiked immediately and significantly, some of the hard-won gains in tobacco consumption reduction achieved in the past few years as reflected in the Global Adult Tobacco Survey (GATS) 2009-17, might reverse at the cost of the economy and public health. The GATS has shown 17 per cent reduction in tobacco consumption. If we do not increase the taxes significantly, use of tobacco products, especially by youths, will increase.

So, there is a necessity for a stiff increase in tax on tobacco products at the earliest so that we can discourage the youth from using such health hazardous items.

Studies and surveys from multiple countries reveal that many tobacco users also favour tax hikes as they want to get rid of their habit adopted unwantedly or due to peer pressure. In the pandemic times when we need major revenue to spruce up the health infrastructure, heavily taxing tobacco products is ideal to discourage its consumption.

Imposing tax on tobacco will rather present Government’s image as ‘pro-poor.”   For, in India, tobacco consumption is in general higher among the poor and middle-class people who are more prone to tobacco related diseases and can’t afford the medical expenses. Imposing tax will help save the poor on tobacco items.

Levying tax on tobacco is not anti-farmer too, as cultivators have little say in profits accrued from the sale of tobacco products. For instance, out of  Rs 100 earned on tobacco products, less than Rs 3 goes to the farmers. In fact, when you increase taxes, decrease in consumption does not take place instantly, it takes time. That window should be utilized by the Government to provide the tobacco growers and others to find alternative sources of livelihood in the short run. Notably, there are about 48 lakh bidi workers in the country.

The Government has a plethora of tax options available. Like National Calamity Contingent Duty (NCCD), Compensation Cess and Excise Duty which was re-introduced for tobacco taxation two years ago. These can be exclusively used by the Government to raise prices of the tobacco products.

Hence, cess on tobacco could be a win-win formula. Ensuing Budget session provides a perfect opportunity for the Government to move towards this direction for the betterment of the country’s economy and health of the countrymen.

(The writer is a health economist and adjunct professor, Rajagiri College of Social Sciences, Kochi.)