Tobacco tax: Palestine

P a le stin e Palestine Tobacco tax: How does WHO recommend that tobacco is taxed, in general?1 To reduce the affordability of tobacco This reduces consumption of tobacco and improves public health. Domestic not customs Customs taxes are eroded in trade agreements and thus do not provide long-term revenue. Excise not general Excise tax raises the price of the taxed good relative to all other goods, which discourages its consumption. Specific not ad valorem Specific tax leads to higher prices and a lower market share of cheap cigarettes. In an ad valorem system, a minimum specific tax should also be implemented to guarantee minimum price and revenue levels. Uniform not differential Uniform tax leads to larger reductions in smoking as there is less opportunity to switch between different tiers and types of tobacco products. Comparable across all tobacco products Similar levels of taxation across products reduce tobacco consumption, rather than simply leading to shifts in consumption between different tobacco products. No duty-free allowances Duty-free sales increase tobacco consumption due to lower prices of products, and reduce tax revenues. Regularly increased Regular tax increases in line with gross domestic product (GDP) ensure that the affordability and consumption of tobacco products reduce. Specific excise tax decreases in real value if it is not increased in line with inflation. With tobacco tax revenue earmarked Ideally, tobacco tax revenue should be earmarked for particular health spending purposes, for example on tobacco control strategies. How has tobacco been taxed in Palestine?2 Cigarettes have specific and ad valorem excise taxes in Palestine. The specific tax rate is NIS 395 per 1000 sticks. Between 2010 and 2014, this specific tax was increased three times. After 2014, it was slightly decreased to the current rate. Waterpipe tobacco has a specific excise rate of NIS 296.62 per kilogram. Cigarettes are also taxed with an ad valorem rate of 270% of the wholesale price. In 2010, the rate of ad valorem tax was 260% and in 2012 it was 278.6%. In Palestine, both cigarettes and waterpipe tobacco are taxed with value added tax (VAT) of 16% on a base of “wholesale price and excise tax”. VAT has increased gradually over the last 10 years. There is a minimum excise tax for cigarettes of NIS 15.32 per 20 sticks. There is no earmarking of tobacco tax revenues. What does WHO recommend as the next steps for Palestine? To reduce the affordability of tobacco Waterpipe tobacco is affordable in Palestine compared to neighbouring countries. Regularly increased Specific excise tax should account for most of the total excise tax, and should be regularly increased to account for inflation and to make tobacco products less affordable. With tobacco tax revenue earmarked Ideally, a share of tobacco revenue should be earmarked for a health spending purpose, and this share could be increased over time. 1 WHO technical manual on tobacco tax administration. Geneva: World Health Organization; 2010. 2 WHO’s series of reports on the global tobacco epidemic, 2009–2019. Geneva: World Health Organization; 2009–2019. © World Health Organization 2020 Some rights reserved. This work is available under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 IGO licence (CC BY-NC-SA 3.0 IGO; https://creativecommons.org/licenses/by-nc-sa/3.0/igo. WHO-EM/TFI/219/E Tobacco tax as percentage of retail price2 Pe rc en ta ge o f r et ai l p ric e ( % ) 100 90 80 70 60 50 40 30 20 10 0 2014 2016 2018 100 90 80 70 60 50 40 30 20 10 0 2010 2012 2014 2016 2018 Pe rc en ta ge o f r et ai l p ric e ( % ) Excise specific Excise ad valorem VAT Import duty Other tax Palestine 25 20 15 10 5 0 Percentage of GDP per capita required to purchase 2000 of the MSB of cigarettes 2008 2010 2012 2014 2016 2018 Pe rc en ta ge o f G D P pe r c ap ita (% ) In Palestine, cigarettes have been taxed such that tobacco tax accounts for a large share of the retail price of tobacco products. Cigarettes and waterpipe tobacco are taxed at similar levels. Affordability2 Overall, cigarettes have become less affordable in Palestine since 2008. However, they became more affordable between 2014 and 2016; there are no data for 2018. This is a potentially worrying trend. Taxes on a pack of 20 cigarettes of the most sold brand (MSB) Taxes on 20g of the MSB of waterpipe tobacco