Background
The Gulf Cooperation Council (GCC) countries relied, until recently, solely on import duties for tobacco products. The agreement for the introduction of an excise and value added tax (VAT) in 2016 and 2017, respectively, in most GCC countries, was a major breakthrough for public health. There is, however, ample room for improvement.
Methods
The study examines the outcomes of tax reforms, for both public health and public finances, based on the World Health Organization (WHO) recommendations and best practices worldwide. Tax simulations were performed using the WHO TaXSiM model. The study is based on data from Saudi Arabia, the only GCC country for which sufficient data existed.
Results
We recommend a stepwise tax reform, which involves increasing the current ad valorem excise tax rate, phasing out import duties keeping total tax share constant and introducing a minimum excise, and finally switching to a revenue-neutral specific excise. If implemented, cigarette tax reform simulations show that the recommended reforms would lead to a higher than 50% increase in cigarette prices, 16% reduction in cigarette sales and almost 50% increase in total cigarette tax revenue. A significant number of cigarette-related deaths would be averted.
Conclusions
The recommended tax reforms are expected to lead to significant improvements in both public health and tobacco tax revenues. Our results provide useful insights that are of relevance to the whole GGC region. The effectiveness of the reforms, however, requires a strong tax and customs administration, including the establishment of a good database to monitor and advance public health.