Tobacco Asia

Tobacco Asia 21 Tobacco International evaluate tax proposals in Brussels or London, the calculation now takes into account the risk of replicating illicit channels in Southeast Asia in Western markets. At the same time, aggressive tax policies in Europe and swift fiscal reforms across Africa and Asia intersect with a broader question raised by economists world‑ wide: Are tobacco taxes still a dependable source of revenue? The Tax Foundation's analysis indicates that many governments have reached or gone beyond the revenue‑maximizing point predicted by the Laffer Curve. When elasticity increases—as con‑ sumers switch to vaping, pouches, heated tobacco, or illegal sources—raising taxes can reduce both legal consumption and revenue. Frontier Economics recently found the UK cigarette price elasticity to be 2.61, based on the latest data, a sharp increase from previous decades (which was significantly higher than the estimate derived from older data: 1.01). With such high elasticity levels, any substantial tax hike ultimately reduces revenue instead of boosting it. This trend is accelerating due to widespread substitution. Lower‑risk nicotine products— ENDS, pouches, HnB, Swedish snus—have increased consumer options. While this shift is beneficial for tobacco harm reduction, it creates instability for governments that depend heavily on taxes from combustible cigarettes. Still, inter‑ national institutions such as the World Health Organization and the Bloomberg School of Pub‑ lic Health argue that tobacco‑tax increases must continue, not retreat. Their position rests on the long‑term public health benefits and the assertion that many governments still tax below the WHO Framework Convention on Tobacco Control (FCTC) Article 6 recommendations. Their guidance is fueling active reform ef‑ forts in many countries—ranging from Croatia's comprehensive tobacco tax hikes to Vietnam's adoption of a mixed excise structure, Bhutan's broad reforms impacting cigarettes, cigars, and vaping products, Poland's new tax stamps and nic‑ otine pouch taxes, and Australia's planned excise escalators. Across regions, one factor seems clear: the next decade will reshape how governments use taxation to regulate nicotine markets, generate rev‑ enue, and influence approaches to tobacco harm reduction. The road ahead Despite the global push to update excise systems, the policy environment still faces difficult trade‑ offs. Taxation, which once followed predictable, linear patterns, now operates in a fragmented mar‑ ketplace influenced by illicit trade, political pres‑ sure, emerging nicotine delivery systems, and tech‑ nological advancements. At the Brussels forum, speakers highlighted what they referred to as the "three essentials" for effective tax policy: scientific grounding, market realism, and regulatory harmonization. Pelsers pointed out that differing rules among EU mem‑ ber states add unnecessary complexity. Santi urged policymakers to use taxation as a guiding tool rather than a punitive one. Angelova stressed that agricultural communities and supply chains cannot be overlooked. Few dispute the public‑health benefits of reducing smoking or the fiscal need to stabilize revenue. But worldwide—from Nigeria's single‑ stick markets to London's growing vape use, from Indonesia's excise shortfalls to Europe's TED re‑ vision—the same question is becoming unavoid‑ able: Can excise policy keep pace with a nicotine landscape going through the fastest transforma‑ tion in its history? The near future will require a more collab‑ orative approach, uniting efforts from govern‑ ments, industries, researchers, and law enforce‑ ment agencies, according to industry experts. Track‑and‑trace systems will need improvements. Tax structures should be simplified, and enforce‑ ment strategies will need modern updates. As sub‑ stitution increases, policymakers must reconsider whether traditional tax models from the smoking era still suit a market where combustibles are no longer dominant. What is certain is that the stakes are rising. Whether it's about revenue, public health, or ille‑ gal activity, the world is reaching a critical point in tobacco and nicotine taxation—where old as‑ sumptions are breaking down, and new realities are emerging in real time. Lower-risk nicotine products have increased consumer options, creating instability for governments that depend heavily on taxes from combustible cigarettes. Credit: Basil MK, Pexels.

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