13.13 Hypothecation
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Western Australia is believed to be the first jurisdiction internationally to use an increase in tobacco tax to finance a large investment in tobacco control activities.[72] Following the defeat of their Tobacco Products Control Bill 1983, the WA Government agreed to allocate $2 million per year to the Health Department's Smoking and Health Project (WA Quit Campaign). This additional funding was made possible because of an increase in the state tobacco licence fee from 12.5% to 35%.272
Starting with Victoria in 1987,273 South Australia in 1988274 and then Western Australia in 1990275 business franchise legislation was amended and tobacco legislation introduced to hypothecate a proportion of funds accrued from state licence fees into foundations established specifically to promote and fund health promotion activities.276 [73] Foundations were developed primarily to address community concern about potential loss of sponsorship funds to sport that would have ensued from comprehensive bans on tobacco advertising. A disadvantage of foundations was that they replicated government funding functions and administrative arrangements in sport and recreation and the arts and culture, with the potential for conflicting policies, duplication and gaps. Major advantages included being able to integrate sports and arts funding with health messages, and being able to act flexibly and across public and private sectors.276
The idea of a health promotion levy was soon copied in several overseas states (California 1989, Massachusetts 1990) and countries (Egypt, Iran and Nepal in 1993 for cancer control and Thailand in 2001 for health promotion).276
In the United Kingdom in November 1999, the Chancellor of the Exchequer announced that the National Health Service was to benefit from increases in tobacco taxes.277
Because it locks government in to spending regardless of revenue from other sources and regardless of priorities for spending in areas outside the dedicated fund, hypothecation of any sort is generally not favoured by Treasury officials.
Whether it be through formal hypothecation or budgetary allocation, the World Health Organization recommends earmarking a small portion of the total national tax revenue from tobacco products to fund health promotion initiatives including tobacco control.49, 51
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