Palau Tobacco Excise Tax 2013: An Evaluation of Tobacco Use, Imports, and Expenditures

Abstract

Tobacco use is a public health concern in the Republic of Palau, where cigarette smoking and betel nut chewing with tobacco are highly prevalent. In 2013, Palau enacted the Fiscal Year 2014 Budget Act with Section 26 that established an excise tax on tobacco products beginning in 2014. This study assessed the impact of the tobacco tax on adult and youth tobacco use prevalence, tobacco importation, and household tobacco expenditure between 2010 and 2024. Data were extracted from 3 adult population-based surveys (2011, 2016, 2023), 3 youth census surveys (2013, 2017, 2022), annual tobacco imports data (2010–2024), and 2 Household Income and Expenditure Surveys (2013, 2024). Among youth, there was a significant decline between 2013 to 2022 in the prevalence of betel nut chewing with tobacco by 69.5% (36.4% to 11.1% [P<.001]), cigarette smoking by 51.6% (35.3% to 16.9% [P<.001]), and any tobacco use by 51.6% (54.8% to 26.5% [P<.001]). Among adults, there was a significant decline between 2011 to 2023 in cigarette smoking by 36.4% (36.0% to 22.9% [P<.001]) and betel nut chewing with tobacco by 11.9% (49.6% to 43.7% [P<.001]), but the overall prevalence of any tobacco use remained stable. Annual tobacco imports decreased significantly by 28.6% from 2010 to 2024, however, average household tobacco expenditure increased from 2.4% to 3.1% of total household spending from 2013 to 2024. Despite the excise tax, tobacco use in Palau remains high, highlighting the necessity for sustained policy interventions, including periodic tax increase with adjustment for inflation and the expansion of evidence-based cessation programs.

Abbreviations and acronyms

BRFSS= Behavioral Risk Factor Surveillance System

CHA= Community Health Assessment

HIES= Household Income and Expenditure Survey

NCD= non-communicable disease

PYTS= Palau Youth Tobacco Survey

STEPS= STEP-wise Approach to NCD risk factor surveillance

WHO= World Health Organization

Introduction

The Republic of Palau is a small island nation located in the westernmost part of the Pacific Ocean, 950 miles southeast of the Philippines. The Republic of Palau is a sovereign country that gained independence in 1994 and is affiliated with the United States (US) under the Compact of Free Association (COFA). It is an archipelago made up of about 340 coral and volcanic individual islands, though only 8 of them are inhabited.¹ Palau’s population is 17 614 according to the 2020 Census with the majority of the population residing on the 2 main islands of Koror (65%) and Babeldaob (31%) which are connected by bridge.²

Tobacco use is a major risk factor contributing to the global burden of non-communicable diseases (NCDs), as it is strongly associated with cardiovascular diseases, cancers, chronic respiratory conditions, and other NCDs. Smoking tobacco is a well-known cause of lung cancer and other NCDs, while smokeless tobacco use is associated with cancers of the oral cavity, pancreas, and esophagus.³ Tobacco-related NCDs contribute to premature death and place a substantial burden on the healthcare system with about 57% of Palau’s adult cancers being tobacco-related.⁴

One unique use of tobacco in Palau is chewing young betel nut (areca nut) with tobacco. Betel nut chewing is common throughout Micronesia and chewers generally add slaked lime and tobacco (most often sticks of cigarettes) to their chew.⁵ The increasingly common practice of chewing betel nut quid mixed with tobacco greatly increases a person’s risk of bleeding gums, periodontal disease, oral lesions and cancer.³

Tobacco use in Palau is a significant issue with 55.0% of adults in Palau reporting use any type of tobacco, compared to 18.7% in the US.⁶ In 2023, the Palau Hybrid Survey reported that the adult betel nut chewing with tobacco prevalence was 41.2% and cigarette smoking prevalence was 20.8%. Although betel nut chewing with tobacco is uncommon in the US, according to the 2023 Behavioral Risk Factor Surveillance System (BRFSS), the adult smokeless tobacco use median prevalence in the US is 3.2% and the adult smoking median prevalence in the US is 11.9%, highlighting significant tobacco use disparities in Palau compared to the US.⁷ The Palau Youth Tobacco Survey (PYTS) conducted in 2022 indicated that 16.8% of youth smoke cigarettes and 10.5% use smokeless tobacco, which is substantially higher than the youth cigarette smoking prevalence (1.4%) and the youth smokeless tobacco use prevalence (1.2%) in the US.⁸

Due to the high tobacco use prevalence in Palau, initiatives emerged by joining forces, efforts, campaigns, activities, and programs to fight against the tobacco epidemic. On September 10, 2013, Fiscal Year 2014 Budget Act Section 26 (‘Palau Tobacco Excise Tax’) was signed into law. This law stated that effective January 1, 2014, all cigarettes shall be taxed at a rate of $3.50 per pack and on January 1, 2015, all cigarettes shall be taxed at a rate of $5.00 per pack.⁹ There was no excise tax on tobacco in Palau before this legislation.

No previous studies have been conducted to assess the impact of the Palau Tobacco Excise Tax. The aim of this study was to assess the impact of Palau’s implementation of a tobacco excise tax on adult and youth tobacco use prevalence, tobacco importation, and household tobacco expenditure.

Methods

Study Design

This was a descriptive retrospective study that examined the impact of the Palau Tobacco Excise Tax on the prevalence of tobacco use among adults and youth, tobacco importation, and household expenditure from 2010 to 2024 in the Republic of Palau.

The NCD surveillance system in Palau monitors the prevalence of NCDs, and their risk factors, including tobacco use. Adult tobacco use data for the period were obtained from 3 comparable adult population-based surveys: the World Health Organization (WHO) STEP-wise approach to NCD risk factor surveillance (STEPS) Survey 2011–2013 and the Palau Hybrid Surveys in 2016 and 2023. The WHO STEPS Survey 2011–2013 included 2184 adult participants (aged 25-64 years), Palau Hybrid 2016 included 1768 adult participants aged 18 and older and Palau Hybrid 2023 included 1931 adult participants aged 18 years and older. Although the STEPS and Hybrid Surveys are different, their methodologies allow for comparison.¹⁰ For this study, the datasets for both Hybrid Surveys were restricted to adults aged 25-64 years to allow comparison to the 2011–2013 STEPS Survey. Therefore, 1405 and 1499 adults were retained from the 2016 and 2023 Hybrid Surveys, respectively.

Youth tobacco use data were obtained from the WHO Global Youth Tobacco Survey which is known to Palau as the PYTS and conducted every 4 to 5 years. This is a census survey that is administered to all students in grades 6 through 12 in public and private schools. Data from PYTS 2013 (n=1574), PYTS 2017 (n=1484), and PYTS 2022 (n=1479) were used in this study.

To determine tobacco use, the following tobacco use binary variables were obtained from both adult and youth survey surveys: current cigarette smoking (cigarette smoking in the past 30 days), current betel nut chewing with tobacco (betel nut chewing with tobacco in the past 30 days), current smokeless tobacco use (any smokeless tobacco use in the past 30 days), and any form of smoked tobacco use (any form of tobacco smoked in the past 30 days). Note that e-cigarettes were not considered tobacco use for this study and were not included in any tobacco use estimates due to the fact that (1) longitudinal data on e-cigarette use are unavailable in Palau, (2) the Palau Tobacco Excise Tax did not include e-cigarettes, and (3) e-cigarettes are banned in Palau. These 4 tobacco variables were recoded into a new binary variable (current use of any tobacco products) to indicate the prevalence of any tobacco use in the past 30 days.

Annual tobacco importation data are routinely collected by the Republic of Palau Customs and Border Protection Office which has a data system in place to collect tobacco import tax data daily. Data collected are forwarded to the Office of Planning and Statistics for storage and reporting. Annual tobacco import data from 2010 to 2024 were used in this study.

Household tobacco expenditure data are routinely collected by the Household Income and Expenditure Survey (HIES), a population-based survey which collects data on household expenditure. The annual national tobacco expenditures (by dollar amount) from the 2013–2014 HIES (n=1145 households) and the 2023–2024 HIES (n=1192 households) were used in this study.¹¹

Analysis and Statistics

Prevalence of tobacco use for adults and youth was calculated for all available years and presented using line graphs to display trends over time. Chi-squared tests for independence were performed to assess whether the prevalence of smoking, betel nut chewing with tobacco, and any tobacco use changed significantly between survey years; P-values of <.05 were considered statistically significant. Among adults, tobacco use prevalence was also calculated by age group for each survey year. Linear regression was performed to test the relationship between annual tobacco imports in kilograms and time in years; a P-value of < .05 was considered statistically significant. All calculations were performed using OpenEpi Version 3.01 (OpenEpi, Atlanta, GA) and Epi Info 7 (CDC, Atlanta, GA).

Results

Between 2013 and 2022, youth betel nut chewing with tobacco prevalence significantly decreased by 69.5% (36.4% to 11.1% [P<.001]), youth cigarette smoking prevalence significantly decreased by 51.6% (35.3% to 16.9% [P<.001]) and any tobacco use significantly decreased by 51.6% (54.8% to 26.5% [P<.001]) (Table 1).

Table 1. Prevalence of Tobacco Use among Youth by Type of Tobacco Use, Palau, 2013-2022.

Type of Tobacco Use	2013 % [95%CI]	2017 % [95%CI] P-valuea	2022 % [95%CI] P-valuea
Cigarette Smoking	35.3 [32.9-37.8]	31.2 [28.9-33.7] .022	16.9 [15.0-19.0] <.001
Chewing Betel Nut with Tobacco	36.4 [34.0-38.8]	25.1 [22.9-27.3] <.001	11.1 [9.6-12.8] <.001
Any Tobacco Use	54.8 [52.4-57.3]	45.5 [43.0-48.0] <.001	26.5 [24.3-28.8] <.001

^aP-value based on Chi-square test comparison to 2013 baseline.

Between 2011 to 2016, adult smoking prevalence significantly decreased by 40.0% (36.0% to 21.6% [P<.001]) (Table 2). The decrease in prevalence of betel nut chewing with tobacco by 11.9% (49.6% to 43.7% [P<.001]) and smoking by 36.4% (36.0% to 22.9% [P<.001]) from 2011 to 2023 were statistically significant, but there were no significant changes for any tobacco use between 2011 and 2016 or 2023.

Table 2. Prevalence of Tobacco Use among Adults by Type of Tobacco Use, Palau, 2011-2023.

Type of Tobacco Use	2011 % [95% CI]	2016 % [95% CI] P-valuea	2023 % [95% CI] P-valuea
Cigarette Smoking	36.0 [32.6-38.4]	21.6 [18.6-22.8] <.001	22.9 [19.7-23.9] <.001
Chew Betel Nut with Tobacco	49.6 [47.5-51.7]	46.8 [44.4-49.6] .125	43.7 [41.7-46.8] <.001
Any Tobacco Use	59.5 [57.3-61.4]	59.0 [56.2-61.3] .75	58.7 [55.9-60.9] .58

^aP-value based on Chi-square test comparison to 2011 baseline.

Prevalence of tobacco use among adults by age group from 2011 to 2023 is displayed in Table 3. In 2011, cigarette smoking prevalence was highest among younger adults aged 25–34 years at 43.0% (95% CI 35.9%, 50.3%). Between 2011 and 2023, cigarette smoking prevalence significantly decreased among all age groups, remaining highest among younger adults aged 25–34 years at 30.2% (95% CI 24.8%, 36.1%) in 2023. In 2011, chewing betel nut with tobacco was most prevalent among adults aged 25–34 years at 51.9% (95% CI 47.0%, 56.9%) and among adults aged 35–44 years at 55.3% (95% CI 51.3%, 59.2%). Compared to 2011 betel nut chewing with tobacco prevalence significantly decreased in 2023 among adults aged 25–34 years by 23.1% to 39.9% [P=.002] and adults aged 35–44 years by 24.1% to 42.0% [P<.001]. In 2011, the prevalence of any tobacco use was highest among younger adults aged 25–34 years at 64.2% (95% CI 59.3%, 68.8%) and adults aged 35–44 years at 63.4% (95% CI 59.5%, 67.1%). There were no significant changes in any tobacco use prevalence among any adult age groups between 2011 and 2023.

Table 3. Prevalence of Tobacco Use among Adults by Age Groups and Year, Palau, 2011-2023.

Age Group	2011 % [95% CI]	2016 % [95% CI] P-valuea	2023 % [95% CI] P-valuea
Cigarette Smoking
25-34	43.0 [35.9-50.3]	31.7 [26.2-37.7] .013	30.2 [24.8-36.1] <.001
35-44	33.6 [27.9-39.6]	17.8 [14.3-22.0] <.001	25.9 [21.4-31.0] .043
45-54	34.2 [29.4-39.5]	16.5 [13.3-20.2] <.001	17.0 [13.8-20.8] <.001
55-64	33.1 [27.2-39.3]	20.3 [16.2-25.2] <.001	18.3 [15.1-22.1] <.001
Total	36.0 [32.6-38.4]	21.6 [18.6-22.8] <0.001	22.9 [19.7-23.9] <.001
Chewing Betel Nut with Tobacco
25-34	51.9 [47.0-56.9]	44.0 [38.0-50.2] .047	39.9 [34.0-46.1] .002
35-44	55.3 [51.3-59.2]	52.6 [47.6-57.6] .41	42.0 [36.7-47.5] <.001
45-54	48.4 [44.7-52.1]	44.5 [40.0-49.2] .21	48.8 [44.1-53.4] .90
55-64	42.7 [38.4-47.0]	46.1 [40.5-51.7] .35	43.9 [39.5-48.5] .69
Total	49.6 [47.5-51.7]	46.8 [44.4-49.6] .125	43.7 [41.7-46.8] <.001
Any Tobacco Use
25-34	64.2 [59.3-68.8]	60.5 [54.3-66.3] .33	60.8 [54.7-66.7] .38
35-44	63.4 [59.5-67.1]	61.6 [56.7-66.4] .57	59.1 [53.6-64.3] .196
45-54	58.5 [54.9-62.1]	55.7 [51.1-60.2] .34	59.6 [55.0-64.1] .71
55-64	51.8 [47.4-56.1]	58.4 [52.8-63.8] 0.068	55.4 [50.9-59.9] 0.251
Total	59.5 [57.3-61.4]	59.0 [56.2-61.3] .751	58.7 [55.9-60.9] .58

^aP-value based on Chi-square test comparison to 2011 baseline.

Figure 1 displays tobacco annual imports in kilograms in Palau from 2010 to 2024. There was a 28.6% decrease in tobacco imports during the period, from 31 758 kg in 2010 to 22 673 kg in 2024. The linear regression analysis showed a statistically significant decrease in tobacco imports over the period (F=6.22, P=.026), with an R² of 0.324. The coefficient of determination reveals that approximately 32.4% of the variance in tobacco imports is explained by changes in years, indicating a moderate fit.

Figure 1. Relationship between Annual Tobacco Imports in Kilograms and Time in Years, Palau, 2010–2024.

In the 2013–2014 HIES, the average annual income was $25,600 with 2.4% of annual household expenditure devoted to tobacco expenditure. In 2023–2024, average annual income was $33,289 with 3.1% of annual household expenditure devoted to tobacco expenditure. Between 2014 and 2023, the proportion of households that reported tobacco expenditures increased slightly (52.2% in 2014 vs. 56.0% in 2024).

Discussion

This study represents the first assessment of the impact of the Palau Tobacco Excise Tax since its implementation in 2014. The primary aim was to evaluate its effect on adult and youth tobacco use, tobacco importation, and household tobacco expenditure in the Republic of Palau between 2010 and 2024. Given that NCDs are the leading causes of death in Palau and tobacco use is a significant factor, understanding the effectiveness of this legislation is crucial for future public health initiatives.

The findings of this study indicate a clear and statistically significant downward trend in the prevalence of betel nut chewing with tobacco, smoking, and any tobacco use among youth in Palau between 2013 and 2022. These trends among youth suggest that the tobacco excise tax, potentially alongside other ongoing prevention efforts, may be contributing to a reduction in tobacco use among younger generations. This is consistent with previous studies that demonstrate youth sensitivity to tobacco excise taxes.¹² Despite these declines, the current youth cigarette smoking prevalence in Palau (15.8% in 2022) remains more than ten times higher than in the US (1.4%), highlighting the need for sustained or intensified efforts. Such efforts include stricter enforcement on existing laws prohibiting tobacco sale to minors, school-based prevention programs, high impact media campaigns, comprehensive smoke-free laws, and building capacity for tobacco dependence treatment and cessation services.¹³

Among adults, the smoking prevalence showed a notable initial decline from 2011 to 2016 after the tax implementation, however prevalence remained fairly stable from 2016 to 2023. This stabilization suggests that while the initial tax increase may have had an impact, its long-term effect on reducing adult prevalence might have plateaued, indicating a need for further intervention. This is consistent with findings from a similar study conducted in the US.¹⁴ Notably, the current adult smoking prevalence in Palau (20.8%) remains almost twice that of the US (11.9%). Although the adult smoking prevalence and betel nut chewing with tobacco decreased from baseline, there were no significant changes in prevalence of overall tobacco use among adults. Reducing adult betel nut chewing with tobacco remains a challenge because of its strong cultural significance. Chewing betel nut is associated with social interactions and fostering friendships, enhancing critical thinking in group discussions, and promoting concentration and relaxation.¹⁵ A qualitative research study from Guam found that participants who attempted to quit acknowledged that betel nut chewing plays a key role in socialization, which makes cessation particularly difficult.¹⁶

It is important to note the unique uses of tobacco in Palau, where betel nut chewing with tobacco is highly prevalent, with almost all chewers adding sticks of cigarettes to their chew. The highest smoking prevalence was among ages 25–34 years, whereas those 45 years and older maintained the highest prevalence of betel nut chewing with tobacco across all surveyed years. Although the smoking prevalence significantly decreased among all age groups from 2011 to 2023 and betel nut chewing with tobacco prevalence significantly decreased among younger adults from 2011 to 2023, the prevalence of any tobacco use remained fairly consistent among all adult age groups from 2011 to 2023. This suggests that many adult dual users may have shifted their method of tobacco use but still continued to use at least 1 form of tobacco. With very limited tobacco cessation services available in Palau, it is recommended to establish infrastructure and capacity for tobacco dependence treatment and cessation services, such as one-on-one sessions or group counseling run by trained counselors to help people quit using tobacco.¹⁷

This study found a statistically significant decrease in tobacco imports in Palau from 2010 to 2024, providing evidence that the tobacco excise tax likely impacted consumption of tobacco products in Palau. Although many adults are still using tobacco, it is possible that they have reduced the amount of tobacco they consume to reduce costs. Further research could examine patterns of tobacco use in Palau to evaluate the impact of the tobacco excise tax on the amount of tobacco being consumed by users.

This study also revealed an increase in annual household tobacco expenditures. Although the tax may have initiated cessation, reduced consumption, or prevented initiation for some, it places a financial burden on households that continue to use tobacco. This event often occurs with excise taxes on goods like tobacco, where consumers continue to purchase the product despite the increases which can reduce spending on essential items such as health, education, housing, and clothing.¹⁸ This finding highlights the urgent need for targeted tobacco control measures to address the crowding-out effects of tobacco consumption on household budgets.

While this study provides valuable insights, there are limitations. This study relied on existing secondary survey data and the amount of tobacco used by each individual was not included to determine if there was a reduction in use among tobacco users. Additionally, all tobacco use data from adults and youth is based on self-report, so bias such as social desirability bias may have resulted in under reporting and should be considered. Import data included overall imports of tobacco, so tobacco use by visitors cannot be determined. Given that Palau has a strong tourism industry, this could have potentially impacted import data. Also, import data only includes legally imported tobacco, and there are illegal imports that occur in Palau. It is possible that the excise taxes could have increased illegal importation to avoid excise taxes. Additionally, data availability from HIES was limited, so further analyses such as spending by type of tobacco and expenditure by demographics could not be performed. Finally, data on e-cigarette use was not examined because of the inability to assess trends over time due to lack of data from baseline years, as well as the fact that Palau prohibits the importation, distribution, selling, possession, and use of e-cigarettes.¹⁹

This study has several strengths in its design and contributions to understanding tobacco control in Palau. This study marks the first assessment of the impact of the Palau Tobacco Excise Tax since its implementation in 2014. This fills a significant knowledge gap, as no previous studies had evaluated the effects of this legislation. This study comprehensively examined the impact of the tobacco excise tax on multiple levels: prevalence of tobacco use among adults and youth, tobacco importation, and household expenditure. This approach provides a holistic view of the legislation’s effects on different aspects of tobacco use and its economic consequences in Palau. This study used existing and routinely collected data from several established surveillance systems in Palau, which enhances the reliability and comparability of the findings.

To combat the tobacco epidemic, these study findings strongly support the need to implement further tobacco tax increases with adjustment for inflation. Increases in tobacco taxes are highly effective tool to reduce tobacco use and have even greater health impact when revenues generated from tobacco taxes are used to support tobacco control, health promotion, and other health-related activities and programs.²⁰ Additional recommendations include ensuring enforcement of existing policies, establishing regulations on graphic health warnings or plain packaging of tobacco and nicotine products, implementing evidence-based school-based prevention programs, implementing and evaluating effectiveness of media campaigns, improving comprehensive smoke-free laws, building capacity for tobacco dependence treatment and cessation services, and implementing policies that prohibit tobacco industry interference in public health policy, including prohibition on corporate social responsibility.

Conclusion

In conclusion, these findings support a positive impact that the Palau Tobacco Excise Tax has had on reducing tobacco use among youth and smoking prevalence among adults. However, it has not had a strong long-term effect on chewing betel nut with tobacco among adults and tobacco use prevalence among both adults and youth in Palau remains substantially higher than the US. The increased household spending on tobacco and high prevalence in tobacco use among both adults and youth shows that more efforts like periodic tobacco tax increase, other prevention initiatives, and cessation infrastructure and capacity are needed in Palau. These efforts should be tailored to address specific age groups and forms of tobacco use and consider the unique cultural context of betel nut chewing with tobacco to better fight Palau’s tobacco problem and improve the health outcomes for the Palauan people.