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
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: Suggested Citation