The Public Finance Balance of Smoking in the Czech Republic was a 2001 report commissioned by Philip Morris's Czech division following concerns raised by the Czech health ministry that smoking's costs outweighed its fiscal benefits.[1][2] The study was conducted by Arthur D. Little and found that smokers' early mortality and cigarette-tax revenue outweighed the costs of health-care and lost tax revenue from early death.[1] The study concluded through cost-benefit analysis "based on up-to-date reliable data and consideration of all relevant contributing factors, the effect of smoking on the public finance balance in the Czech Republic in 1999 was positive, estimated at +5,815 mil. CZK."[2]
On July 16, 2001, a leaked report associated with Philip Morris sparked widespread condemnation and intense criticism from various quarters, including politicians, anti-smoking activists, economists, and watchdog groups. In response to the backlash, Philip Morris disowned the report and issued an apology for its conclusions. Following this incident, economist Hana Ross conducted a study which revealed that smoking had a significant negative financial impact on the Czech government's budget, costing at least 14,455 million CZK (approximately $373 million) each year. This study effectively countered the report's argument that there were financial benefits from smoking-related deaths.
The report was unusual as historically, tobacco companies had denied the link between smoking and early mortality, whereas the report used early mortality as a selling point.[3] Though similar studies in Europe had been done a decade earlier, Philip Morris stated that it had canceled any new similar reports in countries including Poland, Slovakia, Hungary, and Slovenia.[4][5] CNN reported that an Arthur D. Little representative had told them that Philip Morris had commissioned similar studies in Canada and the Netherlands, though Philip Morris stated it had no such on-going reports.[1]
The Czech Prime Minister, Miloš Zeman, had previously remarked on the financial advantages of smoking for the state budget. He humorously suggested that his smoking habit was a contribution to the state's fiscal stability, noting, "By smoking, I contribute to the stability of the state budget. By buying cigarettes, I increase state revenues, and when I die of lung cancer, the state won’t have to pay me a pension." Additionally, Zeman pointed out that smokers support the state budget through tobacco taxes and indirectly reduce state expenditures by having shorter lifespans, thereby diminishing the need for state-provided elderly care. [6][7]