Lower taxes on Heated Tobacco Products are subsidizing tobacco industry – new research

(Press-News.org) University of Bath Press Release Lower taxes on Heated Tobacco Products are subsidising tobacco industry – new research Governments missing out tax revenues, hampering health policy  

Governments which impose lower taxes on heated tobacco products in the hope of encouraging smokers away from conventional cigarettes are effectively subsidising the tobacco industry, missing out on much-needed tax revenues and hampering their own public health initiatives, new research from the University of Bath shows.

Researchers examined the effect of tax changes on the tobacco market in Ukraine, which has become one of the few countries in the world to apply equivalent specific tobacco taxes to traditional cigarettes and heated tobacco products (HTPs).

Unlike conventional cigarettes where tobacco is burnt, and e-cigarettes which contain nicotine but not tobacco, HTPs heat tobacco to produce an inhalable aerosol. Demand for HTPs has soared in recent years as consumers look for what many regard as a less harmful product that gives a similar experience to traditional cigarettes.

In many countries, HTPs are subject to lower tax rates and lighter regulation than traditional cigarettes but the study showed lower tax rates were benefiting the tobacco companies’ bottom lines at the expense of the consumer and government coffers.

“Our study showed that tobacco companies positioned HTPs as premium products alongside their premium cigarettes. When the tax regime in Ukraine changed, the selling price point in the market didn’t change, it just resulted in the industry making less profits. This suggests that governments which apply lower taxes to HTPs are only succeeding in boosting tobacco industry profits and depriving themselves of tax revenue – essentially, they are granting a subsidy,” said lead researcher Dr Zaineb Sheikh of the university’s Tobacco Control Research Group.

Dr Sheikh said the study - Examining cigarette, heated tobacco, and e-cigarette market pricing and tax passthrough in Ukraine during the 2019-2022 tax reforms – sheds light on how tobacco companies translated taxes on HTPs into retail prices for consumers, which she said would be invaluable information for policymakers and public health strategy.

Traditional cigarettes continue to account for the largest share of the market in Ukraine but demand for HTPs and e-cigarettes, touted by tobacco companies as lower-risk options for smokers, is surging in what the researchers called ‘a new frontier in global tobacco control efforts’. The study shows that in Ukraine HTP sales rose 278% from 2019 to 2022 while sales of traditional cigarettes declined.

“These new products are often marketed as reduced-risk alternatives, appealing particularly to younger consumers who are often drawn to the technological allure of these devices. However, the long-term health effects of these products remain uncertain, and while some evidence suggests some of these novel products may assist in smoking cessation, others indicate limited or inconclusive efficacy or that they may undermine smokers’ efforts to quit,” Dr Sheikh said.

Another recent study by the Tobacco Research Control Group questioned claims that data from clinical studies proves HTPs are less harmful for health than conventional cigarettes. Researchers examined the data from 40 clinical trials on the potential health effects of HTPs and determined the overall findings from the studies to be inconclusive.

Co-researcher Dr Rob Branston of the University of Bath School of Management said the tobacco industry continually adapted its pricing strategies to mitigate the impact of higher taxes on its profits, often undermining public health objectives.

He said tax harmonisation such as that undertaken by Ukraine aligns with World Health Organization (WHO) recommendations, which emphasise that uniform taxation can prevent market segmentation and the emergence of products designed to circumvent existing regulations.

“But the taxation of such novel products has been inconsistent across different countries, with many jurisdictions applying lower tax rates or failing to tax these new products at all, so understanding how the industry responds to their tax increases has become more urgent,” Dr Branston said.

“There is some evidence that e-cigarettes may help smokers on the journey towards quitting but our view is the same cannot be argued for HTPs and nor is there compelling independent evidence that they are less harmful than combustible cigarettes – so they should be taxed accordingly,” he added.

The study was produced in conjunction with Johns Hopkins University and both it and the University of Bath Tobacco Control Research Group are supported by Bloomberg Philanthropies as part of the Bloomberg Initiative to Reduce Tobacco Use (www.bloomberg.org).

The research team comprised Dr Sheikh, Dr Branston, Lilia Olefir of the Smoke Free Partnership in Brussels (previously of the Life advocacy Center in Kiev Ukraine), and Dr Kevin Welding of Johns Hopkins University Bloomberg School of Public Health.

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Notes to editors 

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The Tobacco Control Research Group

The Tobacco Control Research Group (TCRG) at the University of Bath is part of STOP, a global tobacco industry watchdog whose mission is to expose the tobacco industry tactics that undermine public health. Comprised of a network of academic and public health organisations, STOP researches and monitors the tobacco industry, shares intelligence to counter its tactics, and exposes its misdeeds to a global audience. STOP is funded by Bloomberg Philanthropies as part of the Bloomberg Initiative to Reduce Tobacco Use (BI). TCRG is a multidisciplinary, international research group that examines how companies influence health and policy and evaluates and provides evidence for policy change.

 

 

 

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