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Timor-Leste Government endorses The Union tax policy paper, “Higher Tobacco Taxes for a Healthier Timor-Leste”

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With a diverse group that included Members of Parliament, mayors, academics, civil society members, religious leaders, and representatives from the Ministry of Finance, the Ministry of Health, the World Health Organization and other key stakeholders, The Union launched its tax policy paper— “Higher Tobacco Taxes for a Healthier Timor-Leste” in Dili. The high level meeting on 4 August 2021 was attended by over 70 participants, garnering significant media attention. The publication represents a collaborative effort between The Union, Ministry of Health (MOH), and National Alliance for Tobacco Control (NCTC).

“Higher Tobacco Taxes” includes five key recommendations: 1) Increase the specific excise tax on tobacco so that it eventually reaches at least 70% of the retail price. 2) Levy the tax per unit (e.g., per stick) as opposed to per weight (kg). 3) Index the excise tax for inflation and for per capita income growth, ensuring that cigarettes become less affordable over time. 4) Invest in tax administration and enforcement (e.g., introduce tax stamps, collect data to aid customs with risk profiling) 5) Commit a portion of the revenue to invest in health, general pandemic preparedness, and poverty alleviation.

There was strong support for the paper’s recommendations. Dr Jose Abilio Fatima, General Director of Taxation, Ministry of Finance, commented, “The current taxation system is ineffective. MOF is committed to reviewing the current policies and considering the best practices and recommendations presented today.” Similarly, Noe Da Silva, Member of Parliament and President of Commission F, called for Parliament to act immediately to pass higher tobacco taxes. “The current excise tax is too low,” he said. “The National Parliament should increase tobacco tax by 25%-30%.”

Providing important context, Tara Singh Bam, Director of The Union Asia Pacific explained why tax is fundamental to curbing the tobacco epidemic. “Higher tobacco taxation is one of the most effective ways to prevent children from smoking,” he said, noting that increased tobacco tax also has powerful ripple effects.  “Raising tobacco tax will help Timor-Leste address poverty, improve the human capital index, fund preparedness for the current and future pandemics, and help Timor-Leste achieve its Sustainable Development Goals, and 2011-2030 strategic plan.”

Timor-Leste ratified the WHO FCTC in 2004. Since then, the country has successfully implemented several key provisions. In 2018, for example, it implemented the world’s largest pictorial health warning, covering a total of 92.5% of cigarette packs. At the same time, however, the country’s total and excise tobacco taxes—in 2018 they were 21.8% and 19%, respectively–-are well below the WHO recommendation of at least 70% of retail prices.

Today, the country has one of the world’s highest smoking rates: nearly 61 percent of adult males and over nine percent of adult females used tobacco in 2020. The tobacco prevalence among young people is similarly high, and about 42% of boys and 21% of girls ages 13-15 used tobacco in 2019.

“Smoking rates in Timor-Leste are unacceptably high,” lamented Josefina Joao, Director of Disease Control, Ministry of Health. “Young people can still afford to buy cigarettes because of their low price. Taxes must be increased.”

More than 700 people in Timor-Leste die from tobacco-related diseases each year while smoking’s annual economic cost amounts to USD 64 million, or about 1.5% of the country’s GDP.

Dr Arvind Mathur, WHO country representative to Timor-Leste, made it clear that Timor-Leste can overcome its tobacco burden with proper taxation policy. Citing evidence from other countries, he noted that while tobacco use tends to be higher among poor people, financial disincentives work. “Poor populations are particularly price-sensitive, “he said. “They are more likely to quit or reduce consumption when taxes are increased.  He also issued a warning, cautioning that the industry will propagate lies about taxes leading to increased illicit trade.