Socioeconomic Impact of Smoking Ban Regulations: Analysis

1. Introduction

The tobacco use epidemic is one of the biggest public health threats across the world, killing around 6 million people a year (600.000 of them are among non-smokers exposed to second-hand smoke). 22% of the world’s adults are smokers and nearly 80% of the world’s smokers live in low and middle-income countries. As it is well known, smoking is a leading global cause of preventable disease and death.[footnoteRef:2] [2: (The World Bank, 2017)]

The WHO Framework Convention on Tobacco Control (WHO FCTC) is the first treaty negotiated under the auspices of the World Health Organization. It was adopted by the World Health Assembly on 21 May 2003 and entered into force on 27 February 2005. It has since become one of the most rapidly and widely embraced treaties in United Nations history. The WHO FCTC is an evidence-based treaty that reaffirms the right of all people to the highest standard of health. It represents a paradigm shift in developing a regulatory strategy to address addictive substances; in contrast to previous drug control treaties, the WHO FCTC asserts the importance of demand reduction strategies as well as supply issues.

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However, FCTC standards are minimum requirements, and signatories are encouraged to be even more stringent in regulating tobacco than the treaty requires them to be.

In this paper, three different possible regulations of the smoking ban are analyzed in order to see which economic impact they have not only in society but also for the hospitality industry and the government, including the health care system.

The first of them, called 'Status Quo' reflects a very weak regulation since it allows smoking in almost all public spaces, such as bars restaurants, or even in some workplaces, public transport. This system is implemented most of all in the Balkans, that is, in countries such as Bosnia Herzegovina or Serbia. This policy is not working well as it does not protect the citizens as it should, not only the smokers but also those who are secondhand smokers.

As an alternative public policy, a partial anti-smoking law has been analyzed, that is, one that allows smoking only in certain indoor areas, such as bars, clubs, or similar spaces, or has two separate rooms: one of them for smokers and the other for non-smokers. This kind of policy is established in countries such as Austria and Germany.

Finally, the alternative public policy number two is a total smoking ban. Spain has implemented this system that prohibits smoking in all kinds of indoor public spaces and even in some outdoor areas, such as schools, or playground areas.

2. Main Part

a. General comparison between the public policies

As a starting point, the general profile of each policy will be analyzed, based on the WHO reports on the global tobacco epidemic.

The prevalence (%) of tobacco smoking is one the biggest differences between the three countries, which have diverse policies. In Spain, where there is a total smoking ban, the prevalence for current adult smoking is 25,4%, while in Austria it is 26,9% and in Bosnia, it is 33,6%.

There are several kinds of taxes on cigarettes. An excise tax is a tax on tobacco produced for sale within a country or imported and sold in that country. It can be either specific (a set amount per pack) or ad valorem (an amount proportional to the cost of the pack). VAT (value added tax) may be charged in addition and most countries that have VAT impose it on a base that includes an excise tax and customs duty.

Regarding the WHO reports, which analyze the taxes on the most sold brand of cigarettes, it allows to see the differences. In Austria, where there is a partial smoking ban, the price for a tobacco 20 cigarettes pack is 5 Euros. From this price, 75,7% are total taxes including 20% specific excise, 39% ad valorem excise, and 16,7% VAT.

On the other hand, the price for a pack of 20 cigarettes in Spain is 4,85 Euros. From this price, 78,3% are total taxes including 9,9% specific excise, 51% ad valorem excise, and 17,4% VAT.

At last, in Bosnia, the price is much lower, 2,3 Euros. The taxes in this third country are 84,3% in total: 26,7% specific excise, 42% ad valorem excise, and 14,5% VAT.

Once the general price overview is complete, an affordability comparison can be made. As a highlight, Bosnia is a middle-income country, so tobacco is less affordable than in other countries. Nevertheless, as there are almost no smoking restrictions, the percentage of smokers is higher. The percentage of GDP per capita required to purchase 100 packs of the most sold brand of cigarettes in Bosnia is 5,91%, whereas in Austria it is 1,24% and in Spain 2,02%.

Finally, in the context of the annual tax revenue from tobacco products on each country, a total excise can be found out adding the specific excise to the ad valorem. The highest total excise is the one from Spain (around 7.151.250.000 Euros), in second place is Austria (around 1.776.300.000 Euros) and at last Bosnia (415.562.485 Euros).

b. Status Quo

As it has been already mentioned, as a Status Quo, it has been taken as policy the one applied in the Balkan area, especially in Bosnia and Herzegovina.

i. Exposure to tobacco smoke (ETS)

In Bosnia and Herzegovina, the WHO Countrywide Integrated Noncommunicable Disease Intervention (CINDI) program, estimated in 2001 that 36% of employees were exposed to tobacco smoke in the workplace for more than 5 hours per day, 15% for between 1-5 hours, and 6% for less than an hour. This highlights the ineffective implementation of a law banning smoking in workplaces which was adopted by Parliament in 1998. 66% of interviewees were also exposed to passive smoking in their households. In comparison, a study done in Finland found that in 2000, 8% of non-smoking men and 4% of non-smoking women were exposed to tobacco smoke at work.

Global Youth Tobacco Survey carried out in the region indicates high exposure to tobacco smoke in public places as well as very high exposure of children to ETS at home, ranging from 69% in Bulgaria to 97% in Serbia.

ii. Health impact

Lung cancer incidence and mortality data also indicate the high toll that tobacco use extracts in South Eastern Europe. Estimates by the International Agency on Research on Cancer for the year 2000 indicate that this region has among the highest age-standardized male lung cancer incidence and mortality rates in Europe. The highest lung cancer incidence rates in Europe were seen in Hungary (95.5/100,000), followed by Croatia (82.5/100,000) and Bosnia (81.2/100,000), while the lowest were found in Sweden (21.4/100,000). Lung cancer mortality was highest in Hungary (86.2/100,000), followed by Poland (71.5/100,000) and Croatia (70.3/100,000).

For example, in Bosnia from 1842 cases found in the year 2000, 1238 were lead to death.

iii. Workplace

Restrictions on smoking in workplaces and public places protect non-smokers from involuntary exposure to secondhand smoke. They also help smokers quit and for those that continue to smoke help them reduce consumption. According to various studies, such restrictions have reduced tobacco consumption by 4 to 10 percent in the presence of high-level awareness of the health consequences of exposure to secondhand smoke. Complete bans are more effective than those that allow smoking in some parts of the workplace. Contrary to industry propaganda, ventilation offers little protection again secondhand smoke. Such restrictions also play a key role in denormalizing smoking.

Nevertheless, in such countries, like the Balkan area, even though smoking is prohibited in the workplace, there is always a place for them to smoke, what supposes a infringement of the regulation.

c. Public Policy 1: Partial Smoking Ban

i. Exposure to tobacco smoke

A smoke-free hospitality industry reduces the pollution in the air. In one study, the nicotine concentration of air in restaurants in different European cities was carried out. Especially in Vienna, the burden was particularly high with an average of 122 and 91 μg / m³ of nicotine. If a person dances for four hours in a Viennese nightclub, it is exposed to a similar level of passive smoking (2.2 μg / m³) that if it lived with a smoker for one month.

In bars and restaurants with mixed policies, concentrations in non-smoking areas were three times higher than in smoke-free restaurants, possibly through contamination from the smoking areas, supporting the conclusion that the barrier systems implemented were insufficient to eliminate exposure to tobacco smoke.

Some studies show that bars and discos are the places with the highest concentrations. Restaurants have the next highest concentrations. In cities like Vienna, it must be pointed out that the concentration in the part of the restaurant where smoking is not allowed is not dissimilar to concentrations in areas where it is allowed.

ii. Health impact

In 2002, direct costs in Germany amounted to 223.6 billion Euros. This corresponds to health expenditure for outpatient, inpatient, and day-patient care, health and administrative services, and household health expenditure.

The Austrian health expenditure - public and private - according to SHA (System of Health Accounts, OECD) amounted to 23,068.1 million Euros in 2003. Current health expenditure amounted to 22,112.7 million Euros.

The paid-out federal and state care funds amounting to 1,747.9 million euros in 2003 are deducted from the current health expenditure and thus receive the reference value for direct medical costs in Austria: 20,364.9 million Euros. [footnoteRef:10] [10: (Institut für Höhere Studien (IHS), 2008)]

However, following the implementation of the German partial smoking ban, the all-cause hospital admission rate decreased significantly by about 10 admissions per 1 million population (or 1.6%). The cardiovascular admission rate also decreased by 1.9 per 1 million population (or by 2.1%). Applying the average health care costs of one hospital day of about 500 Euros, just these avoided cardiovascular admissions would yield a resource savings estimate worth 78 thousand Euros per day.

d. Public Policy 2: Total Smoking Ban

i. Exposure to tobacco smoke

The proportion of non-smokers that had undetectable cotinine concentrations increased from 7.3% before the 28/2005 law to 53.2% after the implementation of the 42/2010 law. The results confirmed the positive impact of smoke-free laws on SHS exposure at the population level. For example, after legislation, in New York, it was found an increase in the proportion of respondents with cotinine concentrations below the detection limit (from 32.5% to 52.4%); in Scotland, it was also observed an increase in individuals with undetectable cotinine (from 11.3% to 27.6%); and, in England, it was discovered that the odds of having undetectable nicotine were 1.5 times higher than before the legislation. In addition to this shift in the distribution of the non-smoking population towards lower levels of cotinine, the mean concentration declined from 0.93 ng/mL to 0.12 ng/mL (adjusted reduction of 87.6%).

ii. Health impact

It is estimated that there are about 29 health problems associated with smoking, although the bulk of spending is devoted to five, such as coronary heart disease, with an expenditure of 3,600 million Euros, chronic obstructive disease (3,000 million Euros), strokes (710 million Euros), asthma (267 million Euros) and lung cancer (163 million Euros). The direct health costs of these five diseases associated with tobacco consumption currently represent an estimated figure of 7695.29 million Euros per year in Spain.

iii. Working Productivity

The consumption of tobacco in the companies supposes annual costs of 8,780 million Euros. These costs can be divided into those produced by work absenteeism for diseases related to tobacco consumption, which amount to 292.57 million Euros, those related to the loss of productivity due to the consumption of tobacco in the workplace, amounting to 6720.80 million Euros, and the additional costs of cleaning and maintenance of facilities which would be 1768.50 million Euros.

3. Effects on the hospitality industry

One of the biggest fears of applying anti-smoking measures comes from the hospitality industry: in particular bars and pubs. In some countries, the propagation of smoke-free air policies has been slowed by fears that restrictions on smoking may have a negative impact for this sector. Debates centre on the claim that there will be a loss of revenue as a result of smokers visiting these establishments less frequently, cutting their visits shorter, and spending less money than they otherwise would if smoking were permitted. Against this, it is argued that the premise that smokers would change their habits is wrong or that even if some smokers reduce their visits, it could be balanced by non-smokers increasing their visits.

Due to this, numerous studies have been carried out once the law comes into force, analyzing the economic impact that it really entails.

One of them, carried out in Norway, demonstrates that, although having one of the most adverse climates in Europe, the bar revenues were practically not affected by the entry into force of this ban.

In 2005, the year after the law came into force in Norway, pub revenue was 1.2% higher than the year before (2003). Although revenue increased, it did not increase as much as personal consumption in general, so as a share of consumption, pub revenue went down from 0.077 to 0.071%. The results show that there was no significant result on revenue in restaurants. The results for pubs were more mixed. As a share of personal consumption revenues in pubs went down in the short run, but in the long run and in absolute terms revenues increased. The data on revenues show that there was little if any, immediate or long-term impact on restaurant revenue since this grew more in 2005 (3.3%) than in any of the three previous years. Pub revenue is more interesting since it declined by 1% in 2005 and increased by a record 7.8% in 2006.

On the other hand, even though the bar revenues do not seem to be affected as much as it was supposed to be, bars and pubs had to invest as a consequence of this law. For instance, the example of Spain is very interesting. In the year 2006, the first smoking ban came into force, which was a partial one. Because of this new regulation, bars, restaurants, and pubs that wanted to adequate their establishment had to invest in order to separate it into two new areas: one for smokers and another for non-smokers, as they were afraid their businesses had a negative economic impact. The investments ranged from 6.000 to 30.000 EURO depending on the size of the bar or restaurant. Howbeit, in the year 2011, a new law came into force, which supposed the actual total smoking ban. Even though the bar revenues did not sink as the owners and workers thought it would do, the investments they already made had no sense.

Regarding a study made in California, where a smoke-free air regulation is applied, it is suggested that bars are more appealing to the population as a whole when they are smoke-free. Nonetheless, it is quite possible that if an individual bar voluntarily banned smoking it would lose business. This would be the case, for instance, if the bar in question does not promote its new smoke-free status to the population of non-smoking potential customers. Far from smoke-free laws reducing bar revenues, they may actually increase them by simultaneously attracting more non-smokers while repelling few existing smokers, who have few alternative venues available.

In Austria, under a law passed in 2015, a total ban was to become effective starting in May 2018. But the new coalition government between the conservatives and the far-right Freedom Party (FPO) just canceled the measure. The change was prompted by the leader of the Freedom Party and current Austrian Deputy Chancellor Heinz-Christian Strache, who told Parliament last month that an absolute ban would infringe on “freedom of choice”. Dr. Manfred Neuberger, professor emeritus of the Medical University of Vienna, pointed that it was an irresponsible decision and a victory for the tobacco industry and that the new government had just made Austria the ashtray of Europe.

4. Conclusions

Through this paper it is able to appreciate the different consequences of regulating the smoking ban by diverse public policies.

In countries where the regulation is null or lax (Balkan area), the number of smokers is much higher and as a consequence, diseases and deaths occur more frequently due to tobacco consumption, moreover, it does not only affect those who decide smoking but to the rest of the population as passive or second-hand smokers.

As such, almost half of the adult population smokes in Bosnia and Herzegovina, accounting the Non-communicable diseases for 45% of deaths in the country. Smoking is rife in Bosnia and Herzegovina, where the price of a pack of cigarettes is one of the lowest in Europe and Central Asia. The country ranks number 8 in the world in terms of smokers per capita and the percentage of adolescent smokers is steadily increasing.

On the other hand, in countries with a partial ban such as Germany or Austria, the number of smokers is also high, but not as high as in countries where there are not as many restrictions. Nevertheless, health issues are still a problem for these countries, because, as the studies mentioned before and many others state, the fact of separating establishments such as restaurants or bars in two areas, practically does not produce any benefit, since both rooms are finally contaminated. However, the number of diseases related to smoking is much lower than in places where the policy called in this paper 'Status Quo' is applied.

To conclude, a total ban on smoking in closed public settings is the best way to contribute to the fight against smoking. According to the data provided, countries that apply this regulation have a lower number of smokers, not only those who do not start smoking but those who, thanks to these measures also smoke less or have been of great help to quit.

All in all, smoking is one of the biggest causes of death, totally preventable and that generates in the state, companies, and healthcare system costs that cannot financed by the payment of taxes by smokers. Thanks to preventive measures and prohibitions, the number of smokers has declines and the population is clearly healthier.

My own recommendation to solve this endemic and worldwide problem would be to establish a total smoking ban in every country, and as an addition, an increase in taxes, this is, on the price of a cigarette pack.

Increasing the retail price of tobacco products through higher taxes is the single most effective way to decrease consumption and encourage tobacco users to quit. When tobacco prices increase fewer people use tobacco, people who continue to use tobacco tend to consume less, also those who have quit are less likely to start again and, of course, the young are less likely to start using tobacco.

Tobacco taxes are generally well accepted because most people understand that tobacco is harmful. In high-income countries, a 10% increase in tobacco prices will reduce consumption by about 4%. The effect of higher prices on reducing consumption is likely to be greater in low- and middle-income countries.

It has been found out that an average price increase of 10% throughout the EU would lead to an average increase in revenues by about 6.76%. Moreover, the results showed that the average tobacco taxation benefit of all EU countries significantly increased by 6644 million US$ as a result of rising cigarette prices. In the future, increased cigarette prices in all EU countries are likely to reduce further the demand for cigarettes, and the appreciable increase in tobacco taxation revenues could be spent on the prevention and control of cigarette-related diseases.

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