Taxation policy for tobacco control: the experience of France

4. Taxation policy for tobacco control: the experience of France

This case analyses the utilization of taxation policy as a key instrument of an integrated public health policy on tobacco control. In particular, it explores the factors which led to the introduction of this policy and the contextual factors which influenced its development and execution.

Situation prior to the policy initiative

The consumption of tobacco products increased from the 1950s to 1980s and then remained stable until the early 1990s. It began to fall following the introduction of the Evin Law in 1991 (Fig. 1), although from the late 1990s to 2002 the decrease in consumption and sales of tobacco was not substantial. Between 1950 and 1991, empirical evidence indicated that the weak pricing policy that had been followed during that period resulted in relative prices falling and tobacco consumption moderately increasing (Fig. 2,3). Three main policy interventions aimed at controlling tobacco had been developed over this time with varying levels of success: the Veil Law (1976), which was the first attempt, produced moderate results, while the Evin Law (1991) and the Health Department Plan (1999–2002) had better results. These policies created an enabling environment for the introduction of a new strategy in 2003.

Fig 1. Sales and price of tobacco in France, 1950–2000

0 1 2 3 4 5 6 7

1 9 5 0 1 9 6 0 1 9 7 0 1 9 8 0 1 9 9 0 2 0 0 0

Grams per adult and per day

0 2 0 4 0 6 0 8 0 1 0 0 1 2 0 1 4 0

Relative price of tobacco

V e il la w E v in la w

T o ta l to b a c c o c o n s u m p t io n C ig a r e t te s

P r ic e

Fig. 2. Sales of cigarettes per person aged over 15 years, France, 1900–2000

0 1 2 3 4 5 6

1900 1925 1950 1975 2000

Evin law

Cancer Plan Veil law

Number of cigarettes per adult per day

Fig. 3. An effective policy: evolution of prices and consumption of cigarettes, France

2 3 4 5 6 7

1950 1960 1970 1980 1990 2000

Cigarettes per adult and per day

60 90 120 150 180 210

Tobacco prices, corrected from inflation rate

Source: Hill C, Laplanche A. Tabagisme et mortalité : aspects épidémiologiques. BEH, 2003, 22–23:98–100 (http://www.invs.sante.fr/beh/2003/22_23/beh_22_23_2003.pdf, accessed 30 November 2006).

The second milestone was the Health Department Tobacco Plan which promoted smoking cessation measures and policies to prevent secondary smoking. This plan launched the transfer of decision-making responsibility for taxes on tobacco and alcohol from the Ministry of Finance to the Health Department and allowed the use of pricing and taxation policies as powerful public health instruments to enhance tobacco control. The new approach enabled the Health Department to take full control of excise duty and taxes on tobacco products, rather than just the valued added tax, and thus gave it full control of pricing issues. New earmarked tobacco taxes were introduced and the revenues used to finance public health and social security activities.

Launch, development and implementation of the policy

In 2003, France introduced a new strategy, “The Cancer Plan”, to combat tobacco. Aggressive taxation of tobacco products has been used as the major tool to control and reduce tobacco consumption within a multifaceted approach. This approach has involved a combination of taxation policy with enforcement of stringent anti-tobacco legislation (ban on advertising, ban on smoking in public places) and intensification of health education programmes emphasizing interventions for the prevention and cessation of smoking.

The launch of the Cancer Plan, as well as the preceding policies, had consequences for a wide range of stakeholders – tobacco companies, tobacconists, Ministry of Finance, Customs, the public. The development and implementation of policy were challenging and needed to be carefully managed.

To avoid or neutralize political pressures from various stakeholders such as the tobacco industry lobby, the Ministry of Finance, Customs and smokers, the Health Department had to develop a holistic approach in dealing with them.

The introduction of earmarked taxes was carefully planned and communicated to the public so as to galvanize public support for the imposition of tobacco taxes. The increase in taxation was justified by pointing to the proposed use of these tax revenues for financing public health and social security activities.

The Health Department had also to counter opposition from tobacco industry, which were clearly threatened by the tax increases and united to form a strong lobby. The Department countered this resistance in part by proposing to harmonize taxation on all tobacco products. This divided the interests of the tobacco companies, subject as they were to intense competition and conflicting interests between companies with a strong interest in cigarettes and those with interests in other tobacco products. The introduction of harmonized taxation ensured a further fall in the number of brands offered at low prices.

The new plan was also opposed by the Customs and the Ministry of Finance, which stood to lose revenue, and tobacco retailers, who were concerned about declining sales and the increased risk of cheap counterfeit products, given the high prices. The response of the Health Department was to develop close collaboration with the Ministry of Finance and the Customs, which helped to control the national tobacco market and fight smuggling. Cooperation between these

Departments also ensured that strict controls on licensing of tobacco products were further enforced, the monopoly of circulation in the national market was maintained and the Customs were more active in monitoring tobacco products at the borders. The Health Department, Customs and Ministry of Finance also built alliances with the tobacco companies to fight illegal imports and tobacco smuggling. Collectively, these activities helped to reduce resistance and assisted in the execution of the policy.

Impact of the policy

Analysis of the relationship between tobacco prices and consumption from 1950 to 2003 clearly shows that the demand for tobacco, as measured by consumption, was sensitive to price. The substantial increases in tobacco prices that followed the Evin Law have led to a striking decline in tobacco consumption (Fig. 3). From 1993 to 2005, increases in tax rates were used to raise the prices of cigarettes annually by 5% in real terms. This strategy has been successful in reducing

the number of smokers, which fell by 6.5% in men and 5.8% in women between 1995 and 2003.

The rate of decline among young smokers was even higher (over 10%). When the new 2003 strategy was implemented between January 2003 and January 2004, the price of cigarettes increased by 40% while sales fell by 33.5%, and the sales of medicines used to aid smoking cessation doubled and have remained at high levels.

Lessons learned

The Government has employed a multisectoral approach and involved the Ministry of Finance, Customs and the Ministry of Health, as well as the tobacco companies.

The approach to tobacco control was multifaceted and involved a combination of taxation policy with enforcement of stringent anti-tobacco legislation (ban on advertising, ban on smoking in public places) and intensification of health education programmes emphasizing interventions for the prevention and cessation of smoking.

Shifting the leadership role for taxation policies on tobacco to the Health Department from the Ministry of Finance – which is responsible for taxation issues in most countries - has been a main factor in increasing the effectiveness of the tobacco control policy .

A more comprehensive approach was adopted by combining effective, evidence-based interventions on the regulation and pricing of tobacco products with health promotion programmes.

Tobacco consumption has been shown to be sensitive to price increases, so pricing was a valuable instrument of anti-tobacco policy.

Conclusions

Based on the French experience some important conclusions should be drawn.

Control of tobacco taxation by the health authorities appears to be an effective public health policy instrument which can increase social acceptability by reducing demand but at the same time providing revenues to design and implement policies.

Multisectoral and comprehensive interventions are needed to control tobacco consumption effectively.

Giving departments/ministries of health leadership for taxation issues when these are related to public health interventions has proved effective.

Evidence indicates that increases in pricing are an effective intervention in tobacco control strategies. Interventions aiming to blunt demand through price increases do work.