Simulating Fiscal and Public Health Effects of a Proposed Jordan’s Cigarette Tax Reform

This Report was written by Jordan University of Science and Technology (JUST) in Jordan and Social Policy and Development Centre (SPDC). The report assesses the impact of raising cigarette taxes on consumption, smoking prevalence, premature deaths, and tax revenue relative to the status quo. Specifically, the updated simulation considers three scenarios: a combined increase in both the specific and tiered excise components, an increase in only the tiered excise component, and an increase in only the specific excise component. At the baseline, or status quo, cigarette consumption is estimated at 1,123 million packs, with smoking prevalence at 35.6% and total government tax revenue of JOD 1,256.3 million. Each of the tax increase scenarios would improve both fiscal and health outcomes relative to these metrics, with the largest gains in Scenario 2. Increasing both the specific and tiered excise components by 15% would raise retail prices by 13.1%, thus reducing cigarette consumption by 53.2 million packs and lowering smoking prevalence from 35.61% to 34.77%. In turn, this would reduce the number of premature deaths by 27,656. Government tax revenues would also increase by an estimated JOD 116.5 million in this scenario. The report concludes with recommendations for policy makers to raise both components of the excise tax to effectively reduce consumption, while raising tax revenue.