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The Impact of Income and Taxation in a Price-Tiered Cigarette Market: findings from the ITC Bangladesh Surveys
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  1. Iftekharul Huq1,
  2. Nigar Nargis2,
  3. Damba Lkhagvasuren3,
  4. AKM Ghulam Hussain4,
  5. Geoffrey T Fong5,6
  1. 1 Department of Economics, East West University, Dhaka, Bangladesh
  2. 2 Economic and Health Policy Research Unit, American Cancer Society, Atlanta, Georgia, USA
  3. 3 Department of Economics, Concordia University, Montreal, Quebec, Canada
  4. 4 Department of Economics, University of Dhaka, Dhaka, Bangladesh
  5. 5 Department of Psychology and School of Public Health and Health Systems, University of Waterloo, Waterloo, Ontario, Canada
  6. 6 Ontario Institute for Cancer Research, Toronto, Ontario, Canada
  1. Correspondence to Dr. Iftekharul Huq, Department of Economics, East West University, Dhaka 1212, Bangladesh; iftekharulhuq.12{at}gmail.com

Abstract

Background Taxing tobacco is among the most effective measures of tobacco control. However, in a tiered market structure where multiple tiers of taxes coexist, the anticipated impact of tobacco taxes on consumption is complex. This paper investigates changing smoking behaviour in lieu of changing prices and changing income. The objective of the paper is to evaluate the effectiveness of change in prices (through taxes) and change in income in a price-tiered cigarette market.

Method A panel dataset from the International Tobacco Control Bangladesh surveys is used for analysis. For preliminary analysis transition matrices are developed. Next, probit and multinomial logit regression models are used to identify the effects of changes in prices and changes in income along with other control variables.

Findings Transition matrices show significant movement of smokers across price tiers from one wave to another. Regression results show that higher income raises the probability to up-trade and decreases the probability to down-trade. Results also show that higher prices raises the probability to up-trade and reduces the probability to down-trade. Although not significant, there exists a negative relationship between the probability to down-trade and the probability to intend to quit.

Conclusion It is evident from the results that a price-tiered market provides smokers more opportunities to accommodate their smoking behaviour when faced with price and income change. Therefore, tiered structure of the tax system should be replaced with uniform taxes. Moreover, overall cigarette taxes need to be raised to an extent so that it off-sets any positive effects of income growth.

  • taxation
  • price
  • economics
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Footnotes

  • Contributors IH is the lead author of the paper. NN and DL contributed in developing the research idea. AKMGH contributed in the econometric analysis. GTF is the chief investigator of the ITC Project and a co-author of the paper.

  • Funding The ITC Bangladesh Survey was supported by the International Development Research Centre (IDRC Grant 104831-002) and Canadian Institutes of Health Research (MOP 79551 and MOP 115016), and the US National Cancer Institute (P01 CA138389). Additional support was provided to GTF from a Senior Investigator Award from the Ontario Institute for Cancer Research and a Prevention Scientist Award from the Canadian Cancer Society Research Institute. Additional support in preparing this paper was provided to University of Waterloo by the Canadian Institutes of Health Research (FDN-148477).

  • Disclaimer The authors alone are responsible for the views expressed in this article, and they do not necessarily represent the views, decisions, or policies of the institutions with which they are affiliated.

  • Competing interests None declared.

  • Patient consent Obtained.

  • Ethics approval Bangladesh Medical Research Council and the Office of Research Ethics, University of Waterloo, Canada.

  • Provenance and peer review Not commissioned; externally peer reviewed.

  • Correction notice This article has been corrected since it was published Online First. Additional details of support were added to the Funding section.

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