The most effective approach to controlling the spread of tobacco use is through policies that directly reduce the demand for it. There are many valuable ways of going about this, from advertising bans to public smoking prohibitions, but the most potent and cost-effective option for governments everywhere is the simple elevation of tobacco prices by use of consumption taxes.
Evidence from countries of all income levels shows that price increases on cigarettes are highly effective in reducing demand. Higher prices induce cessation and prevent initiation of tobacco use. They also reduce relapse among those who have quit and reduce consumption among continuing users. On average, a 10% price increase on a pack of cigarettes would be expected to reduce demand for cigarettes by about 4% in high-income countries and by about 5% in low- and middle-income countries, where lower incomes tend to make people more sensitive to price changes. Children and adolescents are also more sensitive to price increases than adults, allowing price interventions to have a significant impact on this age group.
Article 6 of the WHO Framework Convention on Tobacco Control, "Price and Tax Measures to Reduce the Demand for Tobacco", recognizes the importance of this policy and calls on governments to implement tax and price policies to contribute to their national health objectives.
Most governments levy taxes on tobacco products, including excise taxes, value added taxes (VAT) or general sales taxes and import duties. Of these, tobacco-product excise taxes are most important for achieving the health objective of reduced tobacco consumption since they are uniquely applied to tobacco products and raise their prices relative to the prices of other goods and services.