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Effect of cigarette tax increase on cigarette consumption in Taiwan
  1. J-M Lee1,
  2. D-S Liao2,
  3. C-Y Ye3,
  4. W-Z Liao4
  1. 1Department of Logistic Management, National Kaohsiung Marine University, Kaohsiung, Taiwan
  2. 2Department of Applied Economics, National Taiwan Ocean University, Keelung, Taiwan
  3. 3Department of International Trade, Overseas Chinese Institute of Technology, Taichung, Taiwan
  4. 4Department of Applied Economics, National Chung Hsing University, Taichung, Taiwan
  1. Correspondence to:
 Jie-Min Lee
 Department of Logistic Management, National Kaohsiung Marine University, Kaohsiung, Taiwan; jmlee866yahoo.com.tw

Abstract

Objectives: This study evaluates the effect of a 5 New Taiwan Dollar (NT$5) Health and Welfare Tax increase on the consumption of domestic and imported cigarettes and cigars.

Methods: Using statistics published annually from 1971 through 2000, we set up a model based on the Central Bureau of Statistics (CBS) demand model to estimate price and expenditure elasticity coefficients of cigarettes and cigars.

Results: Our results showed that the price elasticity coefficients for domestic and imported cigarettes were −0.644 and −0.822. The consumption of imported cigarettes was reduced by 7.51 packs per capita, and the consumption of domestic cigarettes was reduced by 15.21 packs per capita. Total per capita consumption of cigarettes was reduced by 22.72 packs (18%).

Conclusions: From the public health and financial perspectives, the increase in this excise tax on tobacco to the Taiwan government will have significant effect in reducing cigarette consumption; it will also generate additional tax revenues.

  • CBS, Central Bureau of Statistics
  • GDP, gross domestic product
  • TTWMB, Taiwan Tobacco and Wine Monopoly Bureau
  • WTO, World Trade Organization
  • consumption
  • price elasticity
  • tax
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Footnotes

  • * When cigarette taxes are increased, cigarette companies also raise their prices to obtain the maximum profits from current, addicted smokers to help them offset the future losses due to tax induced reductions in cigarette consumption.15

  • In this model, a choice has been made to include the expenditure variable directly, rather than income. The reason that expenditure variable in model performs relatively well in terms of explanatory power.

  • Competing interests: none declared

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