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The Use of Legal, Illegal and Roll-Your-Own Cigarettes To Research Tob Control: first published as 10.1136/tobaccocontrol-2014-051890 on 4 March 2015. Downloaded from The use of legal, illegal and roll-your-own cigarettes to increasing tobacco excise taxes and comprehensive tobacco control policies: findings from the ITC Uruguay Survey Dardo Curti,1 Ce Shang,2 William Ridgeway,3 Frank J Chaloupka,2,3,4 Geoffrey T Fong5,6,7 1Centro de Investigación de la ABSTRACT ($US$2.3)i per pack of 20 sticks as of 2010. In — Epidemia del Tabaquismo Background Little research has been done to examine response to rigorous control policies, tobacco usage CIET, Montevideo, Uruguay fi 17–11 2Health Policy Center, Institute whether smokers switch to illegal or roll-your-own (RYO) in Uruguay has been signi cantly reduced. for Health Research and Policy, cigarettes in response to a change in their relative price. Although Uruguay’s tobacco control policies University of Illinois at Objective This paper explores how relative prices appear to be comprehensive, concerns have been Chicago, Chicago, Illinois, USA 3 between three cigarette forms (manufactured legal, raised regarding tax avoidance and tax evasion that Department of Economics, manufactured illegal and RYO cigarettes) are associated may impede the effectiveness of increased taxes in University of Illinois at Chicago, Chicago, Illinois, USA with the choice of one form over another after reducing tobacco use. In recent years, extensive evi- 4WHO Collaborating Centre on controlling for covariates, including sociodemographic dence has indicated that many smokers, in particu- the Economics of Tobacco and characteristics, smokers’ exposure to antismoking lar confirmed smokers, engage in tax avoidance or Tobacco Control 5 messaging, health warning labels and tobacco evasion by switching to cheaper cigarette brands as Department of Psychology, 11–20 University of Waterloo, marketing. taxes and prices increase, and reducing price Waterloo, Ontario, Canada Methods Generalised estimating equations were gaps may incentivise smokers to trade up to higher- Libraries. Protected by copyright. 6Ontario Institute for Cancer employed to analyse the association between the price priced cigarettes of better quality.20 21 In addition, Research, Toronto, Ontario, ratio of two different cigarette forms and the usage of a handful of studies show that smokers may also Canada one form over the other. switch to cheaper tobacco products (eg, 7School of Public Health and Health Systems, University of Findings A 10% increase in the relative price ratio of roll-your-own, RYO) or different tobacco products Waterloo, Ontario, Canada legal to RYO cigarettes is associated with a 4.6% (eg, smokeless tobacco) in response to a change in – increase in the probability of consuming RYO cigarettes the relative price or tax.22 26 In Uruguay, owing to Correspondence to over manufactured legal cigarettes (p≤0.05). In its geographically small size and limited price varia- Dr Ce Shang, Health Policy ii 4 6 27 28 Center, Institute for Health addition, more exposure to antismoking messaging is bility, switching down to cheaper RYO Research and Policy, University associated with a lower odds of choosing RYO cigarettes cigarettes may be a more feasible way for tax avoid- of Illinois at Chicago, 1747 over manufactured legal cigarettes (p≤0.05). Non- ance. According to the Global Adult Tobacco W. Roosevelt Rd., Chicago, significant associations exist between the manufactured Survey conducted in 2009,iii about 32.4% of cigar- IL 60608, USA; illegal to legal cigarette price ratios and choosing ette smokers in Uruguay smoke RYO cigarettes, http://tobaccocontrol.bmj.com/ [email protected] manufactured illegal cigarettes, suggesting that smokers compared with only 7.7% in its neighbour country Received 9 July 2014 do not switch to manufactured illegal cigarettes as prices Argentina. While Uruguay has raised its excise Accepted 5 February 2015 of legal ones increase. However, these non-significant taxes on manufactured cigarettes multiple times Published Online First findings may be due to lack of variation in the price ratio since 2004, the excise taxes on RYO tobacco have 4 March 2015 measures. To improve the effectiveness of increased remained substantially lower. Not until 2010 was taxes and prices in reducing smoking, policymakers need the tax rate on RYO tobacco raised to 70% (com- to narrow price variability in the tobacco market. pared to 28–50% in previous years) based on a Moreover, increasing antismoking messaging reduces tax reference price of $U24.29 per 45 g package.iv avoidance in the form of switching to cheaper RYO (figure 1) Therefore, as excise taxes and prices of cigarettes in Uruguay. manufactured cigarettes have increased markedly, the price of RYO cigarettes has decreased to a great on April 29, 2020 at University of Cape Town extent relative to manufactured cigarettes, making RYO cigarettes more appealing as an economic INTRODUCTION alternative. Accordingly, to improve the effective- Since ratifying the WHO Framework Convention ness of increasing cigarette taxes as a tobacco on Tobacco Control (FCTC) in 2004, Uruguay has implemented a comprehensive set of tobacco control policies and become a world leader in the fi 1–3 ght against tobacco. For example, Uruguay has iAccording to the International Monetary Fund World an ad valorem tax structure based on fixed ‘refer- Economic Outlook database, April 2013 edition, 1US$ is ence’ prices that are set by the government and approximately 17 Uruguay dollars in 2010. ii fi adjusted approximately every 6 months to keep Tobacco excise taxes are imposed through xed ad fl 4–6 valorem rates and reference price, thus, function as To cite: Curti D, Shang C, pace with in ation. In recent years, cigarette specific excise taxes instead of ad valorem ones. Ridgeway W, et al. Tob excise taxes have risen several times via the refer- iii – http://www.cdc.gov/tobacco/global/ Control 2015;24:iii17 iii24. ence price, resulting in a cigarette tax of $U38 ivhttp://www.euromonitor.com/usa Curti D, et al. Tob Control 2015;24:iii17–iii24. doi:10.1136/tobaccocontrol-2014-051890 iii17 Research Tob Control: first published as 10.1136/tobaccocontrol-2014-051890 on 4 March 2015. Downloaded from Figure 1 Price ratio and choice of cigarette forms. RYO, roll-your-own. Libraries. Protected by copyright. Figure 2 Shares of cigarette by form. RYO, roll-your-own. control tool in Uruguay, studies that focus on analysing tax trends in inland cities (Durazno, Maldonado, Rivera and Salto). avoidance behaviours in the form of substitution between manu- In particular, the share of manufactured illegal cigarettes in factured and RYO cigarettes are needed. Montevideo grew from 9.3% in 2008–2009 to 13.7% in 2012. (Figure 1: International Tobacco Control (ITC) data suggest This paper explores how the relative prices between manufac- http://tobaccocontrol.bmj.com/ that, once based on regular use instead of last purchase, the tured legal, manufactured illegal and RYO cigarettesv are asso- share of ‘RYO use only’ among the total cigarette use was ciated with the use of different cigarette forms after controlling 10.2% in 2008–2009, 11.6% in 2010–2011, and 9.5% in for a comprehensive set of demographic and socioeconomic 2012; and the share of “RYO use only and dual use of manufac- characteristics and smokers’ exposure to antismoking messaging, tured and RYO” among the total cigarette use was 28.3% in health warning labels and tobacco marketing. Specifically, it ana- 2008–2009, 26.8% in 2010–2011 and 23.2% in 2012). lyses how the price ratio between two cigarette forms is asso- In addition to switching down to cheaper RYO cigarettes, ciated with the choice of one form over another. smokers may also buy cheaper cigarettes in the form of manufac- tured illegal cigarettes. A recent study suggests that illegal cigar- ettes constitute 16.8% of consumption in low-income and METHODS middle-income countries.29 In Uruguay, mixed evidence has been Data on April 29, 2020 at University of Cape Town found on the prevalence of illegal cigarettes. While contraband Data are from the International Tobacco Control Evaluation sales have been estimated to be 7% of total sales,30 which is rela- Project (ITC) Uruguay survey, a longitudinal survey designed to tively low compared with the world average, a recent study using evaluate the tobacco control policies advocated by the WHO 31 ITC Uruguay data suggests that the prevalence of tax avoidance/ FCTC. Sampling weights that account for survey non-response 31 32 evasion may have been increasing in recent years. The authors of were calculated for each wave of ITC surveys. So far, four vi that study used the prevalence of packs without warning labels or survey waves have been conducted in five Uruguayan cities: standard warning labels as an approximation for tax avoidance/ Montevideo, Salto, Maldonado, Durazno and Rivera. The dates evasion and, as of 2011, 20.5% of packages do not carry stand- of these waves were November to December 2006, September ard—or any—warning labels; this is significantly higher than pre- 2008 to February 2009, October 2010 to January 2011, and vious years.17 Analyses on the share of manufactured legal, manufactured illegal and RYO cigarettes in the Uruguayan market also suggest that its share of manufactured illegal cigar- vWe assume all RYO cigarettes are legal because their cheap prices may ettes has been growing markedly since 2008 (figure 2), although be a disincentive for smuggling or illegal trade, though only legally obtained manufactured products are referred to as legal in this paper. the trends of the share of manufactured illegal cigarettes in the viIn wave 1, the only city surveyed was Montevideo. Other cities were capital Montevideo show a somewhat different pattern than the added in later waves. iii18 Curti D, et al. Tob Control 2015;24:iii17–iii24.
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