Economic and public health impact of 2007–2010 tobacco tax increases in Ukraine
- 1International Tobacco Control Research, American Cancer Society, Atlanta, Georgia, USA
- 2Institute of Strategic Research, Ministry of Health, Kiev, Ukraine
- Correspondence to Hana Ross, American Cancer Society, 250 Williams Street, Atlanta, Georgia 30303, USA;
Contributors HR conceived and designed the study and wrote the article. MS helped with the data analysis. KK provided the sales and price data and helped to interpret the results.
- Received 14 September 2010
- Accepted 16 May 2011
- Published Online First 14 June 2011
Objective To evaluate the impact of the dynamic 2007–2010 tobacco tax policy in Ukraine on cigarette prices, cigarette consumption, tobacco tax revenue and the tobacco industry's price strategy.
Methods Using data on cigarette sales, cigarette prices, income and tobacco control policies, price elasticities of cigarette demand in Ukraine were estimated using two methods. Annual data were used to generate point price elasticity estimates, while monthly data were used in a two-step Engle–Granger procedure.
Results The point price elasticity estimate is data sensitive and ranges from −0.11 to −0.62, centring around −0.32. The regression model estimates a long-run price elasticity of −0.28. Cigarette consumption fell by 13% in 2009 and 15% in 2010 while the tax revenue increased by US$700 million and by US$500 million in 2009 and 2010, respectively, compared to the previous year. Tax increases have changed the tobacco industry's price strategy from one of shielding consumers from the impact of smaller tax hikes in 2007–2008, to one of increasing industry net-of-tax prices, after recent, larger tax increases.
Conclusions The higher real tobacco excise taxes of 2009 and 2010 have significantly reduced tobacco consumption in Ukraine, resulting in encouraging public health and fiscal gains. It will be important for cigarette prices/taxes to keep pace with inflation and income growth for this impact to be sustained.
Competing interests None.
Provenance and peer review Not commissioned; externally peer reviewed.