Abstract

PINILLA, J.. Tobacco taxes, prices and demand for tobacco products: a comparative analysis. Gac Sanit [online]. 2002, vol.16, n.5, pp.425-435. ISSN 0213-9111.

This paper analyzes the extent to which an increase in tobacco taxes affects the demand for tobacco products, especially for cigarettes. Comparison of the studies reviewed revealed that higher tobacco taxes result in higher tobacco prices. The price-elasticity of cigarette demand in low- and middle-income countries is about double that in high-income countries, about -0.4. Furthermore, because of the addictive nature of tobacco use, demand for tobacco products is more elastic in the long run than in the short run. The effect of higher tobacco taxes is greater on the young, among whom demand is more sensitive to price than among adults. The empirical evidence for Spain estimates the price elasticity of cigarette demand in the short run to be in the range of -0.5 to -0.3, a result which is similar to other studies. These results do not suggest that tax policy is an effective tool for tobacco control, although taxes are useful for their revenue generating potential and for compensating the external costs generated by tobacco consumption. Furthermore, when the possibilities of substitutions among brands and the strategies of the tobacco industry to compensate for the effects of taxes (lowering prices and encouraging cigarette smuggling) are considered, the panorama is even more pessimistic

Keywords : Tobacco taxation; Demand for tobacco/cigarettes; Addiction; Tobacco control policies.

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