Objective: To develop a simulation model to predict the effects of tax policies on smoking prevalence rates and smoking attributable deaths. Methods: Using data from Taiwan, a simulation model is developed that projects population using birth and death rate data, future smoking rates using initiation, cessation and relapse data, and smoking attributable deaths using smoking prevalence and relative risk estimates. The model projects the number of smokers and smoking related deaths from a baseline year forward. The effects of taxes of different sizes, indexed and unindexed, and temporary versus sustained are modelled using elasticities based on published studies of demand. Results: The model predicts that sustained tax increases have the potential to substantially reduce the number of smokers and the number of premature deaths, with the effects growing over time. Indexing taxes to inflation stems erosion of the tax effect. In our model, when the tax increases by 10 times (NT$50) over the recent tax increase (NT$5) and taxes are indexed to inflation, the smoking prevalence rate falls by over 15% soon after the tax increase, and by about 30% in relative terms by the year 2040, resulting in 4500 lives saved per year. Conclusions: Tax rises have the ability to substantially affect smoking rates in Taiwan. These effects grow over time and lead to substantial savings in lives and health care costs.
