Fundamentals of Economics: Advantages of Increasing Tobacco Excise Duty Tax for Government

Fundamentals
of Economics
1

INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Advantages of increasing tobacco excise duty tax for government........................................3
2. Justify that governments to levy extra taxes on tobacco.........................................................4
3. Main determinants of the price elasticity of demand for tobacco products and why are poor
smokers more price sensitive than the rich..................................................................................6
4. Calculate the price elasticity of demand..................................................................................7
5. What long-term strategy might a global tobacco company should adopt...............................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
2

INTRODUCTION
Macroeconomic fundamentals are disciplines that influence at-large economy, including
figures on joblessness, market forces, economic growth, as well as monetary or fiscal and
international commerce considerations (Elias and Ling, 2018). Economic studies allow
organizations able to make their strategies accordingly and make sure to identify the potential
opportunities which provide growth or maximise the productivity as well as profitability. This
report is based on use of tobacco and how it affects the people. This assessment also based on the
discussion that how levies extra taxes is beneficial for individual as well as government.
MAIN BODY
1. Advantages of increasing tobacco excise duty tax for government
Growing tobacco taxes are enough to lift cigarette prices past inflation levels is making
cigarettes more costly. As for other consumer goods, as the actual price changes, consumers
choose to purchase less of a commodity and it becomes less affordable (Advantages of
increasing tobacco excise duty tax, 2020). It is projected that raising tobacco taxes to raise costs
by 10 per cent would decrease tobacco consumption by 4 per cent in high income countries and
by about 5 per cent in low and middle income. Price rises by taxes typically provide people with
the least amount of income, especially young people, the greater health benefit.
This is often perceived the most cost effective initiative to increase cigarette prices by
considering the substantial profits they provide at relatively little governmental expenditure
(Harris, 2018). A research analyzing the effect on smoking of various tobacco strategies in 2000
found that rising cigarette rates by 33 percent by higher taxes cost 15 times less than other steps
to achieve the very same safety benefit. An even more recent study found that hiking taxes on
cigarettes or tobacco costs as little as US$ 0.005 per individual per annum.
Turkey's recent history offers a clear example of the contribution on use and incidence of
cigarette taxes and other policies. In addition to enforcing other measures, such as tobacco and
cigarette advertisement prohibitions, excise taxes have gradually increased since 2008. This
resulted in a 12% decline in cigarette revenue between 2008 and 2012 and a drop in the
percentage of tobacco smoking in the population from 31.2% to 27.1% over the same period.
WHO predicts that if nations increased cigarette prices by 50 percent per product,
governments all over the world will receive an estimated US$ 101 billion in income that can be
3