Innovative and Sustainable Financing Mechanism for Health Promotion and Tobacco Control

About Lesson

4.4 Counter-arguments to the critics of tobacco tax increases (FAQs)

Introduction

Find out policymakers’ common questions on health promotion and answers here based on the Thailand case study (Thai Health Promotion Foundation (ThaiHealth)

Why is a health promotion fund needed?

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Reason 1

Addresses the need of securing sustainable and stable funding for health promotion programmes including tobacco control

Reason 2

Budget is often limited and vary from year to year, low in the priority agenda and is under-resourced within the national budget

Reason 3

Most cost-effective strategy for the government to secure long-term funds for supporting health promotion and tobacco control activities

Reason 4

These funds have been introduced in many parts of the world including Australia, Switzerland, Austria, Taiwan, Korea, and within Southeast Asia (Thailand, Lao PDR, Singapore and Vietnam)

The Ministry of Health (MOH) can request a larger budget for health promotion activities. Why is there a need for another agency?

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Conventional health budget system is limited for health promotion programmes

Gaining more funds to support health promotion and tobacco control through the conventional budget system is difficult and largely unsuccessful
The annual health promotion budget in most countries is a very small percentage of the total expenditure for health and can vary dramatically from year to year
Programmes can also be subject to changes in policy direction from government to government
This does not allow for the necessary long-term action to achieve real population health gains

Greater flexibility for partnerships (autonomous or semi-autonomous fund management)

Having a fund that is autonomous or semi-autonomous to a Ministry allows for greater flexibility particularly when establishing partnerships with other ministries and external agencies that are not directly affiliated with government institutions
The bureaucratic system in most governments requires many levels of approval and can result in delayed/disconnected programme implementation

Effective way to promote health (Generate sustainable funds using tobacco and alcohol taxes to support health promotion)

An additional fund sourced from the collection of tobacco and alcohol taxes to support health promotion is an effective way to promote health
For example in Thailand, the budget for the health promotion fund is only about 1-2% of the national health budget and is managed by an autonomous health promotion foundation
The Thai Health Promotion Foundation (ThaiHealth) has flexibility in terms of fund management and can support activities that are unlikely or difficult to conduct under a national health budgeting system

What is the difference between dedicated and surcharge tax?

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Surcharge tax

Requiring the industry to pay a percentage of “additional tax” on top of the excise tax.

Dedicated tax

Tax that has been collected by the Ministry of Finance and is set aside for health promotion.

Isn’t a surcharge tax against financial discipline and traditional practices?

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One common argument is that a surcharge tax may set a precedent and disrupt the country’s financial discipline if more or such cases occur.

Australia’s experience with implementing a dedicated tax for health promotion did not set a precedent for other dedicated taxes to be set up.

The original proposal for funding the Thai Health Promotion Foundation was to dedicate 2% of tobacco and alcohol excise taxes.

The Ministry of Finance opposed this proposal.

The fund’s setup committee changed the proposal to require tobacco and alcohol producers to pay an additional 2% in excise tax (surcharge) instead.

This proposal was approved by all parties.

Wouldn’t a surcharge tax impose further burdens on the tobacco/alcohol industry?

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No, it will not

A surcharge tax dedicated to health promotion and tobacco control, on products that have harmful health effects to users should be considered a legitimate action.
Responsible governments should impose surcharge taxes to improve health and decrease healthcare costs.

Small overall impact on the tobacco/alcohol industry

As these are for two highly profitable industries, it has been demonstrated that the overall impact is very small.
The amount of additional tax intended for health promotion is only a fraction of the total taxes that the industry pays, and an even smaller fraction of their profit.

Taxes to be increased regularly

Taxes on tobacco and alcohol need to be increased regularly to keep pace with inflation.
Any increase in affordability of these products can increase consumption rates, which will result in negative health outcomes.

Many existing funds do not work well, why another one? How can we guarantee that this fund will work?

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This argument arose in Thailand where there are many types of funds, mostly small and are also trying to generate secure funds

Most of these funds are set up within government portfolios for services or charity purposes
These funds are established by executive order or decree and do not have oversight by the public or auditing agencies
The potential lack of transparency in the use and administration of many of the existing funds is to be avoided

Health promotion funds do work

Australia, Switzerland, and Austria are just three examples of countries that have long standing and effective health promotion funds

The fund should be bound by clear legislation that stipulates

The objectives of the fund
The sources of funding
The means of administering the fund; and
The processes for transparency and accountability

These specifications ensure the security, transparency, effectiveness, and sustainability of the fund

Why should tobacco and alcohol taxes be used to address problems caused by other risk factors?

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Reason 1

Tobacco and alcohol taxes are already being used for multiple purposes

Reason 2

Existing tobacco and alcohol taxes go to general revenue, combining with other taxes and government revenue

Reason 3

The general consolidated revenue is then allocated to various government ministries and departments

How do we know the size of the budget for a health promotion fund?

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The initial proposed budget for ThaiHealth is one percent (1%) of the government’s annual health budget.

The figure was used as a tactic to convince policymakers to support a health promotion fund.

It may not be enough for a robust health promotion programme, but it is sufficient to fund projects aimed at controlling major non communicable disease risk factors.

A proposal for a higher percentage of tax can be made, but this has to be balanced against political acceptability.

The budget for ThaiHealth in 2011 was only USD 100 million, representing only 1.07% of the government’s annual health budget.

What were the arguments that convinced a positive decision in the parliament?

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Negative social and economic impacts

Tobacco and alcohol consumption have negative social and economic impacts on society, which have become the responsibility of the government, such as increasing healthcare costs associated with illness, chronic disease accidents and crimes
Governments have an opportunity and moral responsibility to fund health health promotion programs, including tobacco and alcohol control by using the taxes they collect from these products

Sustainable funding for health promotion

In Thailand, advocates for the health promotion bill were able to support universal healthcare coverage by arguing that the health promotion fund would help reduce the long-term costs associated with it
A small surcharge tax on tobacco and alcohol is paid by the industry on top of the existing excise tax, providing the government with a net gain using an efficient and existing collection mechanism
An increase in taxes and product prices is an effective health promotion strategy that saves lives and decreases the disease burden and health care expenditure over time
The surcharge for the fund provides sustainable funding for a broad range of health-promoting initiatives that bring immediate and major benefits to a community

Who should be the one driving the process for setting up a health promotion fund?

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Who?

A coalition of advocates and experts who are committed to promoting population health through an autonomous/semi-autonomous agency with a sustained funding source
May include tobacco control advocates, health system experts with public health and health promotion knowledge, finance experts, and technocrat politicians

How will we know if the public will support the establishment of the health promotion fund?

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Conduct a public poll

A public poll revealed that the general public strongly supported the government’s proposal to set up a health promotion fund
Funded by additional tobacco and alcohol taxes, the fund is to focus on tobacco and alcohol content, road safety, exercise, and nutrition
The poll also showed that civil society and non-governmental organizations fully supported tobacco control and other health promotion initiatives

What kind of evidence needed to support the establishment of a health promotion fund?

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Information and statistics on the disease burden of major non-communicable diseases, including total health care costs of treating those diseases.

The current budget for health promotion and tobacco control in the country.

Examples of health promotion foundations established in other countries.

The recommendation stated in Article 26 of the WHO FCTC:

“each Party shall provide financial support for its national activities intended to achieve the objectives of the convention”

Is now the right time to set up a health promotion foundation?

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Most countries aim to strengthen their effort to prevent and control non-communicable diseases (NCDs).

Article 26 of the WHO FCTC requires all parties to secure and provide financial support for the implementation of various tobacco control programmes and activities.

Article 6 of the WHO FCTC recommends that Parties dedicate revenue to support tobacco control and other health promotion programmes.

External sources of funding for NCD control are generally insufficient and temporary.

Donors usually supports pilot or innovative projects that may not be the recipient country’s priority.

Financial resources for health promotion are already available in each country, but a mechanism that secures those resources to fund health promotion and tobacco control is now required.

Tobacco and alcohol products are under-taxed in developing countries and countries in economic transition.

Increasing taxes on tobacco and alcohol and setting aside a dedicated portion to fund health promotion is the most viable solution to address the lack of resources.

The Thai Health Promotion Foundation serves as a model that other countries can consider.