Impact of tobacco tax increases and industry pricing on smoking behaviours and inequalities: a mixed-methods study

Abstract

Background Increasing tobacco prices through taxation is very effective for reducing smoking prevalence and inequalities. For optimum effect, understanding how the tobacco industry and smokers respond is essential. Tobacco taxation changes occurred in the UK over the study period, including annual increases, a shift in structure from ad valorem to specific taxation and relatively higher increases on roll-your-own tobacco than on factory-made cigarettes. Objectives Understanding tobacco industry pricing strategies in response to tax changes and the impact of tax on smokers’ behaviour, including tax evasion and avoidance, as well as the effect on smoking inequalities. Synthesising findings to inform how taxation can be improved as a public health intervention. Design Qualitative analysis and evidence synthesis (commercial and Nielsen data) and longitudinal and aggregate cross-sectional analyses (International Tobacco Control Policy Evaluation Project data). Setting The UK, from 2002 to 2016. Data sources and participants Data were from the tobacco industry commercial literature and retail tobacco sales data (Nielsen, New York, NY, USA). Participants were a longitudinal cohort (with replenishment) of smokers and ex-smokers from 10 surveys of the International Tobacco Control Policy Evaluation Project (around 1500 participants per survey). Main outcome measures (1) Tobacco industry pricing strategies, (2) sales volumes and prices by segments over time and (3) smokers’ behaviours, including products purchased, sources, brands, consumption, quit attempts, success and sociodemographic differences. Review methods Tobacco industry commercial literature was searched for mentions of tobacco products and price segments, with 517 articles extracted. Results The tobacco industry increased prices on top of tax increases (overshifting), particularly on premium products, and, recently, the tobacco industry overshifted more on cheap roll-your-own tobacco than on factory-made cigarettes. Increasingly, price rises were from industry revenue generation rather than tax. The tobacco industry raised prices gradually to soften impact; this was less possible with larger tax increases. Budget measures to reduce cheap product availability failed due to new cheap factory-made products, price marking and small packs. In 2014, smokers could buy factory-made (roll-your-own tobacco) cigarettes at real prices similar to 2002. Exclusive roll-your-own tobacco and mixed factory-made cigarettes and roll-your-own tobacco use increased, whereas exclusive factory-made cigarette use decreased, alongside increased cheap product use, rather than quitting. Quitting behaviours were associated with higher taxes. Smokers consumed fewer factory-made cigarettes and reduced roll-your-own tobacco weight over time. Apparent illicit purchasing did not increase. Disadvantaged and dependent smokers struggled with tobacco affordability and were more likely to smoke cheaper products, but disadvantage did not affect quit success. Limitations Different for each data set; triangulation increased confidence. Conclusions The tobacco industry overshifted taxes and increased revenues, even when tax increases were high. Therefore, tobacco taxes can be further increased to reduce price differentials and recoup public health costs. Government strategies on illicit tobacco appear effective. Large, sudden tax increases would reduce the industry’s ability to manipulate prices, decrease affordability and increase quitting behaviours. More disadvantaged, and dependent, smokers need more help with quitting. Future work Assessing the impact of tax changes made since 2014; changing how tax changes are introduced (e.g. sudden intermittent or smaller continuous); and tax changes on tobacco initiation. Funding This project was funded by the National Institute for Health Research (NIHR) Public Health Research programme and will be published in full in Public Health Research; Vol. 8, No. 6. See the NIHR Journals Library website for further project information.

Associations between smoking trajectories, smoke-free laws and cigarette taxes in a longitudinal sample of youth and young adults

“…Tax increases reduce smoking and increase quit attempts at the population level [27,28], but research seeking to assess their effects on established smokers has identified inconsistent effects [29][30][31][32]. Popular media reports on tax increases typically assume that established smokers will not quit and instead will switch to discount brands and seek out lower-taxed or illicit tobacco [33,34].…”

Anticipated responses to a hypothetical minimum price for cigarettes and roll-your-own tobacco: an online cross-sectional survey with cigarette smokers and ex-smokers in the UK

“…[18][19][20][21] However, tobacco companies can shift tax increases across brand portfolios to preserve affordability for price-sensitive consumers; for instance, charging extra for more expensive variants (overshifting) and absorbing tax increases for the least expensive variants (undershifting). [22][23][24][25][26] Consequently, there is growing interest in non-taxation mechanisms for price control, including a minimum mark-up on wholesale price, a price cap to limit overshifting duty increases onto premium products and a minimum retail price (hereafter 'minimum pricing'). 27 28 Sales modelling data suggest that minimum pricing may reduce smoking prevalence, and the effects may be greater than achieved through taxation alone.…”

Evidence of cushioning of tobacco tax increases in large retailers in Australia

“…13 In other countries such as the UK, tobacco companies have engaged in strategies apparently designed to minimise the impact of tax increases by gradually passing them on to consumers. [13][14][15] By adding a small proportion of the price increase over several months before and/or after the tax increase, rather than all at once on the date on which the tax increase comes into effect, they 'cushion' the effect of the tax increase on the consumer.…”