Assessing the Impact of Cigarette Taxation on the Supply Chain Stakeholders' Revenue Shares in Greece

The chapter aims to analyze the impact of cigarette taxes evolution over the period 1992-2017 on the revenue share of the main tobacco supply chain stakeholders in Greece. This empirical analysis uses a pooled time series from 1992 through 2017 including a data set of retail prices, three tax groups levied on cigarettes (specific tax, ad valorem tax, and V.A.T.), and revenue shares for three categories of stakeholders. The results indicate that the revenue share of the stakeholders is decreasing over the whole period, and specifically, their shares drop by half in the last 15 years. The regression results show that the revenue shares of tobacco companies are most affected by both excise taxes in a negative way, and similarly, both price and the excises affect significantly the revenue share of retailers, whereas the findings regarding distributors' revenues are insignificant. This knowledge is likely to be useful for policymakers in the development of effective tobacco control policies.

Do Regulations on Smoking Limit Cigarette Demand? An Empirical Evidence from Pakistan

Enacting Ordinance No LXXIV 2002, Pakistan has developed crucial anti-tobacco policies in the last two decades. We, therefore, examine in this paper effects of both price (cigarette taxation) and non-price (public regulations on cigarette smoking) anti-tobacco policies on cigarette demand. To accomplish this objective, we examine the short and long run dynamics of cigarette demand in Pakistan using auto-regressive distributed lag (ARDL) estimator covering the period 1981-2018 (annual observations). The study compares price elasticity estimated with and without regulations on cigarette smoking. The result obtained shows that when price increases by 10%, cigarette consumption decreases by 5% in the short run while it decreases by 6.9% in the long run. This finding confirms that cigarette demand model, in Pakistan, is in-elastic. More interestingly, the study finds that non-price regulations on smoking and cigarette demand have negative and statistically significant association. This finding confirms that non-price regulations influences the long-term dynamics of cigarette smoking in Pakistan. Furthermore, we obtain low price elasticity with non-price regulations and high price elasticity without non-price regulations while estimating cigarette demand equation. This empirical result is an evident of the fact that estimated cigarette price elasticity without incorporating non-price regulations into the demand model, are upward biased. The study therefore, concludes that smoking regulation policy based on overstated cigarette price elasticity would produce ambiguous outcomes. Hence, relying only on cigarette taxation (price policy) to regulate cigarette smoking would not produce desirable outcome. In addition, university education is positively and significantly associated with cigarette consumption. This finding show that our university education do not properly convey anti-smoking message to students. To reduce cigarette smoking, Pakistan will have to implement stronger, more comprehensive and better enforced non-price regulations along with taxes on cigarettes.

The Experimental Tobacco Marketplace: Demand and Substitutability as a Function of Cigarette Taxes and e-Liquid Subsidies

Introduction The experimental tobacco marketplace (ETM) approximates real-world situations by estimating the effects of several, concurrently available products and policies on budgeted purchasing. Although the effects of increasing cigarette price on potentially less harmful substitutability are well documented, the effects of other, nuanced pricing policies remain speculative. This study used the ETM as a tool to assess the effects of two pricing policies, conventional cigarette taxation and e-liquid subsidization, on demand and substitutability. Methods During sampling periods, participants were provided 2-day samples of 24 mg/mL e-liquid, after which ETM purchase sessions occurred. Across two ETM sessions, conventional cigarettes were taxed or e-liquid was subsidized in combination with increasing cigarette price. The other four available products were always price constant and not taxed or subsidized. Results E-liquid functioned as a substitute for conventional cigarettes across all conditions. Increasing cigarette taxation and e-liquid subsidization increased the number of participants for which e-liquid functioned as a substitute. Cigarette taxation decreased cigarette demand, by decreasing demand intensity, and marginally increased the initial intensity of e-liquid substitution, but did not affect the functions’ slopes (substitutability). E-liquid subsidization resulted in large increases in the initial intensity of e-liquid substitution, but did not affect e-liquid substitutability nor cigarette demand. Implications 24 mg/mL e-cigarette e-liquid was the only product to significantly substitute for cigarettes in at least one condition throughout the experiment; it functioned as a significant substitute throughout all four tax and all four subsidy conditions. Increasing cigarette taxes decreased cigarette demand through decreases in demand intensity but did not affect e-cigarette substitution. Increasing e-liquid subsidies increased e-liquid initial intensity of substitution but did not affect cigarette demand. Conclusions This study extended research on the behavioral economics of conventional cigarette demand and e-liquid substitutability in a complex marketplace. The results suggest that the most efficacious method to decrease conventional cigarette purchasing and increase e-liquid purchasing may involve greatly increasing cigarette taxes while also increasing the value of e-liquid through potentially less harmful product subsidization or differential taxation.

The Economics of Smoking Prevention

Smoking prevention has been a key component of health policy in developed nations for over half a century. Public policies to reduce the physical harm attributed to cigarette smoking, both externally and to the smoker, include cigarette taxation, smoking bans, and anti-smoking campaigns, among other publicly conceived strategies to reduce smoking initiation among the young and increase smoking cessation among current smokers. Despite the policy intensity of the past two decades, there remains debate regarding whether, and to what extent, the observed reductions in smoking are due to such policies. Indeed, while smoking rates in developed countries have fallen substantially over the past half century, it is difficult to separate secular trends toward greater investment in health from actual policy impacts. In other words, smoking rates might have declined in the absence of these anti-smoking policies, consistent with trends toward other healthy behaviors. These trends also may reflect longer-run responses to policies enacted many years ago, which also poses challenges for identification of causal policy effects. While smoking rates fell dramatically over this period, the gradient in smoking prevalence has become tilted toward lower socioeconomic status (SES) individuals. That is, cigarette smoking exhibited a relatively flat SES gradient 50 years ago, but today that gradient is much steeper: relatively less-educated and lower-income individuals are many times more likely to be cigarette smokers than their more highly educated and higher-income counterparts. Over time, consumers also have become less price-responsive, which has rendered cigarette taxation a less effective policy tool with which to reduce smoking. The emergence of tax avoidance strategies such as casual cigarette smuggling (e.g., cross-tax border purchasing) and purchasing from tax-free outlets (e.g., Native reservations in Canada and the United States) have likely contributed to reduced price sensitivity. Such behaviors have been of particular interest in the last decade as cigarette taxation has roughly doubled cigarette prices in many developed nations, creating often large incentives to avoid taxation for those who continue to smoke. Perhaps due to the perception that traditional policy has been ineffective, recent anti-smoking policy has focused more on the direct regulation of cigarettes and smoking behavior. The main non-price-based policy has been the rise of smoke-free air laws, which restrict smoking behavior in workplaces, restaurants, and bars. These regulations can reduce smoking prevalence and exposure to secondhand smoke among nonsmokers. However, they may also shift the location of smoking in ways that increase secondhand smoke exposure, particularly among children. Other non-tax regulations focus on the packaging (e.g., the movement towards plain packaging), advertising, and product attributes of cigarettes (e.g., nicotine content, cigarette flavor, etc.), and most are attempts to reduce smoking by making it less desirable to the actual or potential smoker. Perhaps not surprisingly, research in the economics of smoking prevention has followed these policy developments, though strong interest remains in both the evaluation of price- and non-price policies as well as any offsetting responses among smokers that may undermine the effectiveness of these regulations. While the past two decades have provided fertile ground for research in the economics of smoking, we expect this to continue, as governments search for more innovative and effective ways to reduce smoking.