Price and Tax

Delegations agreed to establish a working group to develop draft guidelines on tobacco taxation, as well as providing continued funding for the Convention which is in a deficit position. The COP-4 report states that in order to reduce tobacco consumption and improve health using tax/price policies there are some measures to be adopted. A tax structure that raises the prices of all tobacco products, with no consideration given to relative risk issues, and minimizes the gap between the prices of low and high-priced brands of a given type of tobacco product, reduces opportunities for tobacco users to switch to cheaper brands/products in response to tax increases, thus maximizing the health impact of a tobacco tax increase should be implemented. However, some have interpreted this as beneficial to manufacturers that focus on premium products and have urged tax system based on a specific tax (tax per unit) rather than ad valorem system. (Tax based on value).