OPINION: Funding international organizations with higher sin taxes not the answer  

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Should taxpayers around the globe, who dare to take part in activities like smoking and drinking, pay even more in taxes to help fund global organizations that are seeing funding cuts from major countries like the United States?

That’s what World Health Organization Director-General Tedros Adhanom Ghebreyesus seems to think.

According to Ghebreyesus, countries have many “tools” at their disposal to increase “revenue” and then dedicate those funds to things like global health. First among these tools are sin taxes.

A sin tax is a tax that governments impose on citizens on products or services that fancy government bureaucrats deem unnecessary or harmful. This includes things like cigarettes, gambling, cannabis, alcohol and others.

The basic idea governments have is that these products and services are harmful and you, the consumer, should be punished by paying more in taxes on your so-called vice of choice.

Sin taxes are a great way for governments to claim to be taking action to help protect citizens from themselves. In reality, it’s all about turning a tidy profit to pad the government’s bottom line. All the while, paternalistic bureaucrats stand in the way of people just trying to live their lives as they so choose.

Governments usually sell sin taxes as a means to deter people from doing things the government thinks are bad. But the veil slipped in Ghebreyesus’s speech, when he made it clear that higher sin taxes are needed to help make up for shortfalls being faced by the WHO and other global organizations.

Countries including the United States, the United Kingdom and France are all re-examining their foreign aid spending. As a result, organizations like the WHO are hunting for cash.

But increasing sin taxes is just about the worst way to try to make up for the funding shortfall.

First, why should the onus be placed on those who like to smoke, vape, drink or gamble to fix funding problems for global organizations?

Second, increasing sin taxes will just send more people to the black market. Studies have shown that when sin taxes get too high, people turn elsewhere to enjoy their vices. And the government loses out on tax revenue as a result.

As Concordia professor Ian Irvine points out in a C.D. Howe report, history has shown that trying to suppress the demand for “sin goods” steers customers to the black market.

That’s where organized crime comes into the picture. When prices get too high, consumers look elsewhere. And when it comes to the black market, organized crime fills the void.

When a government pats itself on the back for seeing lower numbers of smokers after increasing sin taxes, for example, the more likely reality is that many consumers have simply turned to the black market instead.

If a country is looking to increase its revenue, it’s best not to hand it over to criminal organizations.

Sin taxes are also regressive, as they are imposed on vulnerable people at the same rate as those with extensive means to pay. Ghebreyesus himself is asking low- to medium-income countries to increase sin taxes on their already struggling populace. Smokers and sugary drink consumers come from all socio-economic backgrounds and they will all equally shoulder the burden of these increased taxes. Asking lower-income people to do this, in order to fund programming for other lower-income people, is cynicism at its worst.

There’s no doubt that several international organizations do important work around the globe. But proposing higher sin taxes to fund their shortfalls is wrongheaded.

Whether consumers are enjoying a bottle of wine or are gambling on an outcome of a sports game with their favourite team, taxpayers shouldn’t have to pay more in regressive and ineffective taxes for daring to take part in these activities to help fund international organizations.