Smokeless tobacco taxation: Lessons from Southeast Asia.

Southeast Asia accounts for nearly 86 per cent of the smokeless tobacco (SLT) consumers in the world. The heterogeneous nature of SLT is a major impediment to using taxation as a tool to regulate SLT. This study was aimed to review issues around fiscal policies on SLT with the objective of providing clarity on the use of taxation as an effective policy instrument to regulate SLT use. Descriptive statistics and graphical representations were used to analyze published data from different sources. An analysis of prices and tax between smoke and SLT products was done to understand the impact of tax policies on SLT consumption. India, Bangladesh and Myanmar together account for 71 per cent of the world SLT users. The retail prices (PPP$) and tax were lower for SLT in low- and lower-middle-income countries and higher in high-income countries, on an average, suggesting a direct relationship between the two. Evidence from India and Bangladesh suggested that taxation had significantly reduced SLT use among adults. The compounded levy scheme used in India to tax SLT was found effective after incorporating speed of packing machines into the assessment of deemed production and tax on SLT products. The current analysis shows that taxation can be an effective instrument to regulate SLT consumption if tax rates are harmonized across SLT products and in a manner not to encourage substitution with other tobacco products. It is also imperative to set a minimum floor price on all tobacco products including SLT.