Background:
Increasing taxation of tobacco is known to be effective in tackling smoking. However, efforts to increase prices overall are resisted by the tobacco industry with a number of tactics. These include keeping budget cigarettes within the market, so that there is a large price differential between premium and other cigarettes.

Objective:
We examine trends in price differentials worldwide from 2014–2018 and how these vary by taxation levels and types.

Methods:
Country level panel analyses of price differentials against total, specific excise, ad valorem and other taxes were performed. We used linear regression models with two levels using data from 2014, 2016 and 2018. Price differentials were measured as difference between budget and premium cigarette pack prices. Analyses were adjusted for year, WHO region, and income groups.

Results:
Median price differentials were 49.4% (IQR: 25.9–70.0) in 2014, and in 2018 were 44.4% (IQR: 22.5–69.4). There was substantial regional variation, with the lowest price variations in 2018 in the European region (22.5%) and the largest in the African region (72.0%). In regression analyses, total taxation was linked to lower price differentials, with a 10% increase in taxation associated with a -1.5% reduction (95% CI: -2.5 – -0.4). Increases in specific excise taxation were also associated with reductions in price differentials (-2.5%, 95% CI: -3.7 – -1.2 per +10% specific excise tax). We did not find statistically significant associations between price differentials and ad valorem.

Conclusions:
Smaller cigarette price differentials were associated with higher total levels of taxation as well as specific excise taxes, but not ad valorem taxes. Increasing total and specific excise taxes may reduce cigarette price differentials and tobacco use.