The 13th World Conference on Tobacco OR Health

Objective: To show how an increase in the excise tax on cigarettes increases the retail price and reduces the consumption of cigarettes in two developing countries, South Africa and Jamaica.

Methods: Using graphs, changes in total cigarette consumption over the past 30 years are correlated with changes in the excise tax and retail price in these two countries.

Results: In South Africa the sharp increase in the excise tax was driven primarily by public health concerns. Since 1994 the excise tax on cigarettes has more than tripled in real terms (i.e. adjusting for the effects of inflation), resulting in a 33 per cent reduction in cigarette consumption. Despite the decrease in consumption, government revenue more than doubled over this period.

Jamaica suffers from a huge government debt, and about two-thirds of government current revenue is used to service the debt. The government is desperately looking for new revenue sources. Increasing the excise tax on cigarettes is a handy source of revenue.

In both countries British American Tobacco has a near-monopoly in cigarette manufacturing and distribution. Despite decreased cigarette consumption, BAT was able to maintain and even increase its profitability by using the excise tax increases as a smokescreen for even greater increases in the retail price of cigarettes. Whilst this may exploit smokers, it has beneficial tobacco control consequences because fewer cigarettes are sold.