Does Smuggling Negate the Impact of a Tobacco Tax Increase?

Tobacco Control, Vol 25, p361-362 (May 2016)

6 Pages Posted: 13 Jul 2015 Last revised: 13 May 2017

Date Written: June 17, 2015

Abstract

The tobacco industry claims that increases in tobacco tax will not discourage people from smoking because smokers will simply substitute taxed cigarettes with smuggled untaxed cigarettes. The experience in Hong Kong suggests that smuggled cigarettes are eating into some of the taxed cigarette market share, as the industry suggests. However, despite this increase in the illicit market, higher tobacco tax does effectively reduce total tobacco consumption.

Keywords: Cigarette Tax, Illicit Tobacco, Law of Demand, Tobacco Smuggling

JEL Classification: H2, I1, K4

Suggested Citation

Tsui, Tat Chee, Does Smuggling Negate the Impact of a Tobacco Tax Increase? (June 17, 2015). Tobacco Control, Vol 25, p361-362 (May 2016), Available at SSRN: https://ssrn.com/abstract=2629815

Tat Chee Tsui (Contact Author)

United International College ( email )

China

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