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Uruguay-Overview-Of-Tobacco-Use Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Uruguay: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation Table of contents Executive summary ................................................................................................................................... 3 Acknowledgments ..................................................................................................................................... 5 Introduction .............................................................................................................................................. 6 Tobacco control legislation ....................................................................................................................... 6 Smoke-free places ................................................................................................................................. 6 Tobacco advertising, promotion, and sponsorship ............................................................................... 7 Smoking cessation ................................................................................................................................. 7 Tobacco packaging and labeling ............................................................................................................ 7 Tobacco use ............................................................................................................................................... 8 Tobacco use among adults .................................................................................................................... 8 Smoking among women of childbearing age ...................................................................................... 11 Cigarette consumption ........................................................................................................................ 11 Tobacco use among youth .................................................................................................................. 11 Tobacco use among health professionals ........................................................................................... 13 Tobacco growing ..................................................................................................................................... 13 Tobacco production and sales................................................................................................................. 13 Tobacco taxation ..................................................................................................................................... 15 Tobacco excise revenue ...................................................................................................................... 16 Cigarette and tobacco prices................................................................................................................... 16 Tobacco affordability........................................................................................................................... 18 Cigarette smuggling ................................................................................................................................. 20 Discussion ................................................................................................................................................ 23 Conclusions ............................................................................................................................................. 24 Recommendations .................................................................................................................................. 25 References ............................................................................................................................................... 25 2 Uruguay: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation Uruguay Overview of Tobacco Use, Tobacco Control Legislation, and Taxation A Country Brief Executive summary In 2005, shortly after ratifying the Framework Convention on Tobacco Control (FCTC), Uruguay began an ambitious tobacco control campaign that brought the country to the global forefront in the fight against smoking. The comprehensive tobacco control policies reduced smoking prevalence in the country, especially among young people. Tobacco taxation was one of the key elements of tobacco control. However, the impact of tobacco tax increase in 2005-2008 was modified by the fast economic recovery after the crisis. Cigarette price increases were not high enough to offset the income growth, and cigarette affordability increased. Volumes of cigarette and roll-your-own (RYO) tobacco sales did not change much, and real tobacco revenue did not increase. Tax rates were sharply increased in July 2009 and in February 2010, and the increase in prices was high enough to make cigarettes less affordable despite the income growth. Tobacco sales decreased as well as tobacco consumption, while tobacco revenue increased both in nominal and real terms. In 2011-2014, the tobacco tax rates were not changed. Affordability began to increase again, as real cigarette prices fell, and the income continued to rise. This was followed by an increase in cigarette sales, while tobacco excise revenue decreased in real terms. Despite the growth of legal cigarette sales, estimated volumes of cigarette smuggling also increased. In 2015-2019, excise rates for cigarettes and roll-your-own tobacco were increased every year. While the tax increase by itself was not very high (in 2015-2017, on average 15% annually) its impact was reinforced by the tobacco industry pricing policy: the industry increased its part of the price in line with the excise rate increase, so the tax share in the final price almost did not change. The growth of cigarette price was fast enough to make cigarettes less affordable, and cigarette sales decreased, while the estimated number of smuggled cigarettes almost did not change. Real tobacco excise revenue increased in 2015-2017 but not in 2018, as the excises increased by 12% while the inflation rate was 8%, and sales continued to decline. In 2019, the excise rate was increased by 7.8%. There were two periods when the tobacco taxation policy in Uruguay was really a “win-win” policy: tobacco consumption declined, and tobacco tax revenue increased. This was observed in 2009-2010 and in 2015-2017. The main feature of both periods was the presence of rather sharp increases in the excise tax rates. Another feature was the pricing policy of the tobacco industry, which increased its part of the price above inflation to keep its profits on a declining market. The impact of taxes on sales was also modified by the changes in population incomes, demonstrating the importance of ensuring that tax increases should be high enough to reduce the affordability of tobacco products. The specific feature of the tobacco market in Uruguay is the high prevalence of RYO tobacco consumption. The tax and price of roll-your-own tobacco remain substantially lower than that of cigarettes. While the prevalence of roll-your-own tobacco use was declining over recent years, this kind of tobacco products is mainly used by the poorest smokers. 3 Uruguay: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation The following recommendations could strengthen tobacco control policy in Uruguay and ensure both the reduction in tobacco consumption and an increase in government tobacco excise revenue: • Current tobacco taxation policy of the annual tax increases should be continued, while the rate of the annual increase could be increased to at least 20%. • Tax rates for roll-your-own tobacco should be increased faster than those for the manufactured cigarettes: for example, if the annual cigarette tax increase is 20%, the RYO tax rate could be increased by 40%. Such a tax increase could encourage poorer but more price-sensitive RYO smokers to quit, and it would be very beneficial for their health and wellbeing. • Tobacco use surveillance and monitoring should be further developed in Uruguay, including regular surveys with a collection of comprehensive information on consumed tobacco products. • Uruguay authorities already implemented some effective policies to counteract tobacco smuggling. Such efforts should be strengthened in line with the provisions of the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products. While cigarette smuggling is a problem, it should not be overestimated and used as an argument against further excise increases. 4 Uruguay: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation Acknowledgments This country brief was prepared by a team from the World Bank Group Global Tobacco Control Program led by Patricio V. Marquez, including Konstantin Krasovsky, and Tatiana Andreeva. June 20, 2019 5 Uruguay: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation Introduction The Objective of the Country Brief This country brief presents an overview of current tobacco control legislation, tobacco use, and taxation policy in Uruguay. Data and information were collected from various sources. The brief is intended to serve as the context for complementary assessments on different aspects of tobacco taxation in the country to be shared with government teams and other national and international stakeholders. Tobacco control legislation Uruguay ratified the WHO Framework Convention on Tobacco Control on September
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