There are many case studies documenting how the tobacco industry attempts to influence tobacco tax policies but until now there has been no attempt to collate this information. Together with a colleague at the University of Edinburgh, we have published a systematic review of 36 studies (largely in the US) investigating tobacco industry efforts to influence tax policies between 1985 and 2010.
It is generally accepted that increases in tobacco tax, by increasing the price of tobacco products, are one of the most successful means of reducing smoking. Unsurprisingly, therefore, the tobacco industry works hard to prevent significant tax increases. The industry has developed and utilised numerous arguments and tactics to prevent such increases.
Our review suggests that the tobacco industry lobbies, often collectively, against rises in tobacco tax and that it particularly dislikes increases where revenue is earmarked for tobacco control. Two of the most commonly deployed industry arguments against tax increases have been that such policies are socially regressive and stimulate illicit trade. Both arguments have played an important role in recruiting credible, non-traditional allies to tobacco industry anti-tax campaigns, lending legitimacy to their arguments.
Their use of third parties to promote industry arguments, and evidence of payments/gift-giving to key officials, underlines the importance of ensuring that Article 5.3 of the Framework Convention on Tobacco Control, which seeks to protect public health policies from industry interference, is ratified and applied to tobacco tax policies.
Arguments against tax increases
The most commonly identified argument to prevent tobacco tax increases was that such increases would lead to increases in illicit trade. This in turn, the industry claimed, would:
- Make tobacco more accessible to the young
- Fund the activities of organised crime gangs
- Divert police attention away from other crimes
These arguments helped the industry attract the support of non-traditional, credible allies such as the police. Other commonly cited arguments used by the industry included claims that such increases are:
- Unfair and overly punitive towards smokers
- Socially regressive (i.e. higher taxes unfairly lead to a greater tax burden on poorer groups)
- Have negative economic impacts on local businesses
- Reduce government tax revenue
In reality, evidence indicates:
- The countries with highest tobacco taxes are not the countries with the highest illicit trade problem
- The tobacco industry has been directly involved in smuggling
- Poorer and younger smokers are the most responsive to tax and price increases
- Governments tends to gain, rather than lose, revenue when tobacco taxes are increased
When Canada reduced taxes in response to the illicit trade argument, youth smoking prevalence increased and the level of smuggling did not change. Claims that tobacco taxes are unfair on smokers also ignore the fact that the majority of smokers want to quit and that higher prices are associated with quitting.
Arguments against earmarking
We looked at 17 studies concerning policy proposals to substantially increase taxes and ‘earmark’ (i.e. ‘ring-fence’) the resulting revenue for tobacco control programmes (all at US state level). The industry appears to particularly dislike these kinds of tax increases. They claimed that earmarked funds would be used in ways which the public did not support or in ways which differed from those described in the original proposal. For example, the industry often argued that tobacco tax revenue would be misused to subsidise healthcare for poorer groups, which the industry sometimes framed as a diversion of funds to ‘greedy’ doctors and healthcare companies. This argument was helped by the fact that healthcare and health insurance organisations often did want to divert the funds and by the fact the tobacco industry sometimes worked with them to try to achieve such diversions.
Tactics used to influence tobacco tax policies
Tobacco companies have worked to develop links with credible allies but have also established, funded and worked through front groups, which often have the appearance of local ‘grassroots’ movements. Both of these tactics were used to aid the credibility of industry tax-related campaigns by obscuring the self-interest of the industry. In addition, tobacco friendly experts, consultants, public relations and advertising firms were all employed for similar purposes.
More directly, the industry lobbied policymakers and sometimes paid or gave gifts, to key decision-makers. One US study demonstrated that this tactic had a statistically detectable impact on recipients’ tobacco-related voting pattern.
Paid advertisements in the mass media, letters to newspapers and open-edition articles were also used to disseminate and promote industry tax arguments, often drawing on industry-funded research as support. These findings suggest that journalists and policymakers ought to be alert to the tobacco industry’s potential involvement, even when messages appear to have emerged from grassroots or independent sources. The industry has used such tactics more broadly against other tobacco control measures too.
Influencing tobacco tax structure
The seven studies that considered industry efforts to influence tobacco excise structures indicate different companies favour different structures in different contexts. For example, Philip Morris (which produces the high-end Marlboro cigarettes) was consistently found to promote specific (set-rate) taxes, which benefit the premium, more expensive brands that it tends to focus on selling. In contrast, British American Tobacco (BAT), which has historically had a more diverse brand portfolio including mid-price and cheaper, local brands, appeared to prefer mixed excise structures which incorporate a proportional element. This is presumably because of the competitive advantage this structure confers over Philip Morris. Despite their varying preferences, tobacco companies were consistently found to promote their preferred tax structures by claiming that it would increase government revenue and reduce illicit trade, even when they knew this was not necessarily true.
Full reference to the paper:
Smith, K. E., Savell, E., Gilmore, A. B. (2012) What is known about tobacco industry efforts to influence tobacco tax? A systematic review of empirical studies. Tobacco Control, epub doi: 10.1136/tobaccocontrol-2011-050098.