Tobacco tax: Lebanon

L e b a n o n Lebanon 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 Lebanon?2 Historically, there has been an ad valorem excise tax implemented on tobacco products in Lebanon. The ad valorem excise tax base is formed on producer price or the declared imported value (cost, insurance and freight (CIF)). A specific excise tax was introduced in 2018, but it is only applied on imported products. Local tobacco products have zero specific tax applied. Import tax is levied at 5% of producer price (CIF) and value added tax (VAT) at 11% of retail price. There is no minimum excise tax in Lebanon, and duty-free sales of tobacco products are not banned. What does WHO recommend as the next steps for Lebanon? To reduce the affordability of tobacco Tobacco products are cheaper in Lebanon than in Jordan. There is no minimum pricing law, no minimum excise tax and duty-free sales are not banned. Specific not ad valorem Although a specific excise tax has been introduced in Lebanon, it only applies to imported products, which creates discrimination between products and increases the price gap between different segments of the market. The same tax should be applied to all products, and it should be of a higher value. Uniform not differential Tiers increase product switching and lessen the reduction in consumption. Comparable across all tobacco products The share of tax in the retail price of waterpipe tobacco is lower than for cigarettes, and it appears waterpipe tobacco is more affordable in comparison to cigarettes. No duty-free allowances Banning duty-free sales will increase revenues, decrease affordability and reduce consumption. With tobacco tax revenue earmarked Ideally, a share of tobacco tax revenue should be earmarked for a particular health spending purpose. 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/214/E Tobacco tax as percentage of retail price2 Tax has comprised a fairly constant share of the retail price of cigarettes in Lebanon over the last 10 years. The tax share of the retail price of waterpipe tobacco decreased from 2014 to 2016, and then increased in 2018. Tax comprises a lower share of the retail price of waterpipe tobacco than of cigarettes. A specific excise tax has been implemented in Lebanon in recent years, but only on imported tobacco products. Price and affordability2 The affordability of cigarettes in Lebanon has not changed significantly over the last 10 years. Cigarettes in Lebanon are expensive compared to some neighboring countries, but are cheap in comparison to Jordan. Waterpipe tobacco in Lebanon is cheaper than in Islamic Republic of Iran, Jordan and Libya. 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 (% ) 3 2 1 0 6 5 4 3 2 1 0 Retail price of a pack of 20 of the MSB of cigarettes (PPP) 2008 2010 2012 2014 2016 2018 Re ta il pr ic e (P PP ) Pe rc en ta ge o f r et ai l p ric e ( % ) Retail price of 20 g of the MSB of waterpipe tobacco (PPP) 2014 2016 2018 Re ta il pr ic e (P PP ) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 100 90 80 70 60 50 40 30 20 10 0 2014 2016 2018 100 90 80 70 60 50 40 30 20 10 0 2008 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 PPP: purchasing power parity. Iran (Islamic Republic of ) Iraq Jordan Lebanon Libya Taxes on a pack of 20 cigarettes of the most sold brand (MSB) Taxes on 20g of the MSB of waterpipe tobacco