The World Bank Office in Moldova recommends the states of the region to coordinate their policies on excise taxes on tobacco so as to discourage smoking and reduce potential illicit trade in tobacco products. The rise in taxes on tobacco is an effective tool to reduce its use and associated health risks, increase revenue, and protect the population from the impoverishment effect of high medical care expenses and work absenteeism due to work days lost, IPN reports.
In a news conference, World Bank consultant Irina Guban quoted statistical data showing about 30% of the men in Moldova are smokers. Even if the rate of tobacco smoking in Moldova is lower than in other countries of the region, it exceeds the rate in the EU member states.
“The large number of smokers has direct consequences for the general health of the population and has an impact on life expectancy as well,” stated Irina Guban. Men in Moldova have a life expectancy of 69, while women of 77. This discrepancy is also due to the fact that men smoke more cigarettes a day than women. Smoking starts early in life in Moldova: the average age of starting smoking is 17 years old. Most of the smokers are young people.
According to Irina Guban, besides the negative public health impact, the rising burden of tobacco-related diseases impose a heavy cost on public health expenditures and household budgets. The direct cost of treating smoking-attributable diseases is estimated to represent 6.7% of total health expenditures. The cost of work absenteeism and lower labor productivity of smokers is estimated at 8.6% of GDP in Moldova.
Total volume of cigarettes sales taxed (billion pieces) decreased by about 10% to 5.55 billion pieces in 2017 compared to 6.19 billion pieces in 206. Despite the sales volume reduction, additional tax revenue was collected given the relatively price inelastic demand due to cigarette addiction and low cost of production relative to the average retail price: cigarette excise tax revenue increased from 1.73 billion lei in 2016, to 2.04 billion lei in 2017.
The World Bank experts noted the volume of sold cigarettes can be further reduced by adjusting taxes. Word Bank Country Manager for Moldova Ana Akhalkatsi said the increase in cigarette excise taxes may require increased coordination with neighboring countries. In the long-run, the additional positive fiscal impact should come from lower health expenditures. Also, money could be redirected to other projects designed to improve living conditions.
