Will the European Union's new tobacco tax legislation lead to reductions in smoking prevalence? Evidence from a quasi-experiment in Spain.

INTRODUCTION

The European Union (EU) requires member states to apply minimum taxes on manufactured cigarettes. One such tax has operated in Spain since 2006. This study evaluates the impact of this reform of the tax regime on manufactured cigarette prices and on smoking prevalence, drawing implications for European tobacco tax policy.

METHODS

Quasi-experimental design with treatment and control territories. We analyzed series for prices before and after the reform and used cross-sectional health surveys to implement differences-in-differences estimators for smoking prevalence.

RESULTS

Under the minimum tax regime, prices increased three times faster in the treatment territory. However, the new regime did not affect smoking prevalence among males, either shortly after its enactment or 3 years hence. For women, we find no significant effects on prevalence in the short run, and point estimates ranging between -3.36% and -4.3% 3 years hence, although only one of these is statistically significant.

CONCLUSIONS

The new tax regime affected cigarette prices in the intended direction. However, we find only weak evidence for a reduction in prevalence among women. The availability of cheap, fine-cut tobacco appears to be the most likely cause for the poor results in terms of smoking prevalence. EU member states that have introduced a minimum tax on manufactured cigarettes might achieve little in terms of reductions in smoking prevalence if they allow a tax gap between fine-cut tobacco and manufactured cigarettes. In this sense, it is unfortunate that EU legislation consecrates a differential treatment for the two products.