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I have argued that tobacco taxes are the single best health policy that any country could implement. The World Bank is the most prominent organization in the world with the skills, mandate, and network to support raising tobacco taxes in developing countries where the number of smokers and shortened lives is increasing every year. Yet, the World Bank has committed far too little to this effort. One of the key reasons is World Bank management has let this best-buy for development fall between the cracks — tobacco is a health issue and taxes are a fiscal policy issue.
This problem came into relief for me while reading through a series of World Bank loan documents (yes, sometimes I do strange reading) in countries where the tobacco epidemic is large or increasing. One of the countries I looked at is Ukraine. The fiscal policy side of the World Bank approved two policy loans in 2014 and 2015 for a total of $1.25 billion to reform subsidies and improve tax administration, among other things. The health side of the World Bank approved a US$214 million loan in 2015 to improve health by preventing noncommunicable diseases. And here’s the surprise: neither loan specifically addressed tobacco taxes.
The health loan document mentioned tobacco only once — to state that smoking prevalence among men is about 50 percent. It didn’t specifically mention that 27 percent of Ukrainian men die from tobacco-related diseases. It made no mention at all of the cost-effectiveness of raising tobacco taxes. Meanwhile, the policy loans had plans to reduce tax evasion and improve tax administration but, again, no mention of tobacco taxes. The loans for Ukraine evinced the largest gap between opportunity and action but Ukraine wasn’t the only country. Bangladesh,where 2 million more people started smoking between 2006 and 2012, received a US$60 million Revenue Mobilization Program in 2014 with no mention of tobacco taxes. Indonesia, with 52 million smokers, has the second highest male smoking prevalence in the world at 57 percent. Somehow, a $300 million policy loan to Indonesia found time to address tourist VAT refunds but not for tobacco taxes. Remember: these millions of people will lose an average of 10 years of life if they continue to smoke.
In fairness, the World Bank staff might have proposed incorporating tobacco taxes into these operations and failed to get positive responses from the borrower. If so, the shame falls on the borrowing countries for this lost opportunity. But without a single full-time staff person dedicated to supporting tobacco control, I suspect that a good part of the blame lies with the World Bank’s management which cannot find a way to bridge the fiscal/health gap and demonstrate to clients that tobacco taxes are a big win for improving health and raising revenues.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.