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Tobacco Taxation Policies and Affordability in Turkey <br/>6th Policy Note

Tobacco Taxation Policies and Affordability in Turkey
6th Policy Note

The 6th Policy Note prepared by the TEPAV Tobacco Control Policy Research Team has been published. The note provides an analysis on the effect of taxes (the only price-related tobacco control measure) on tobacco consumption in Turkey. The main findings in this note are as follows:

-        Even though the earlier international literature has clearly demonstrated the effectiveness of higher tobacco product taxes and prices in reducing tobacco use, the current situation in Turkey requires a new approach to design effective policies.

-        The tax burden and real cigarette prices have been increasing in Turkey; however, because of the increase in average income, cigarettes have become less expensive relative to average income. Since retail prices and affordability of tobacco products are the main determinants of consumer behavior, rather than the tax burden on cigarettes per se, the affordability of cigarettes should be one of the leading indicators to monitor.

-                Focusing only on taxes and prices in formulating Turkey’s tobacco control policies will not be sufficient.

-        The current automatic-adjustment mechanism in specific taxes aims to account for the increase in overall prices. This mechanism needs to be revised so that it accounts for increases in income, and not just prices. It is noteworthy that the adjustments have been insufficient in the last couple of years even to keep up with inflationary pressures.

-        Findings show us that tobacco control policies require a multi-objective policy setup considering that it crosscuts several policy areas. For instance, in the case of tax policies, some considerations in policy design are: (i) capability of tobacco consumption in generating sizeable tax revenue, (ii) inflationary pressures of tax increases, and (iii) threat of a demand shift to contraband products in the short-run. In that sense, when other aspects of this complex problem are taken into account, taxes should not be used as the only policy tool.