Table 1

Summary of studies concerning tobacco industry pricing strategies

CountriesType of excise tax at the time of studyExcise tax proportion of price (%) at the time of studyTaxation system at the time of studyGreater reliance on specific tax (in mixed excise regime)StudiesYear of publicationGDP per capita, PPP at the time of study (current international $)TI pricing strategies
Differentially shifting taxesIntroducing new brands/segments/products as downtrade pathwaysChanging product attributes or production processesPrice discrimination and price related promotionsPrice smoothingShrinkflation
OvershiftingUndershiftingOverall pattern
High-income countries
UK Mixed excise61.8UniformYesUnderstanding TI pricing strategy and whether it undermines tobacco tax policy: the example of the UK cigarette market.41 201339 970.9Taxes are overshifted in all brand segments although at a lower rate for the ultra-low price segmentIn March/April each year, the industry undershifts tax increase on ultra-low price brands.OvershiftingN/EN/EN/EN/EN/E
Mixed excise62.72UniformYesTI strategies undermine government tax policy: evidence from commercial data.42 201846 867.9Overshifting in higher segmentsUndershifting in lower segmentsOvershiftingCreation of new FM and RYO segments and launch of cheap productsBrands were repriced from high to low segmentTI introduced new ultra-low price category and kept its price constant via price discriminationTI uses price smoothingAmount sold per pack was reduced
Mixed excise62.72UniformYesUK tobacco price increases: driven by industry or public health?43 201948 709.7Overshifting taxes for both FM and RYO cigarettesUndershifting on cheaper productOvershiftingN/EN/EN/EN/EN/E
Mixed excise62.72*UniformYesQuantile regression of tobacco tax pass-through in the UK 2013–2019. How have manufacturers passed through tax changes for different tobacco products?44 202048 709.7†Overshifting across the price distribution for both FM and RYOOvershiftingN/EN/EN/EN/EN/E
Mixed excise62.72*UniformYesImpact of tobacco tax increases and industry pricing on smoking behaviours and inequalities: a mixed-methods study.45 202048 709.7†Real prices of premium FM and RYO packs increasedUndershifting on subvalue packs and RYO tobacco packsOvershiftingCreation of new FM and RYO segments and launch of cheap products including cigarilloBrands were repriced from high to low segmentTI introduced new ultra-low price category and kept its price constant via price discriminationTI uses price smoothingSmaller packs (17–19 sticks) were introduced
Ireland Mixed excise61UniformYesThe Irish TI position on price increases on tobacco products.46 201144 855.3TI persistently raised tobacco prices by overshifting tax increaseAbsentOvershiftingN/EN/EN/EN/EN/E
USA Specific excise†N/AUniformDo cigarette producers price-discriminate by state?
An empirical analysis of local cigarette pricing and taxation.32
199629 967.7State taxes are overshiftedAbsentOvershiftingN/EN/ECigarette producers do price-discriminate by stateN/EN/E
Specific excise†31.55‡UniformThe incidence of tobacco taxation: evidence from geographic micro-level data.33 200848 382.5Tobacco tax was overshifted to consumersAbsentOvershiftingN/EN/EN/EN/EN/E
Specific excise†37.73‡UniformThe heterogeneous geographic and socioeconomic incidence of cigarette taxes: evidence from Nielsen Home scan Data.52 201251 610.6AbsentTaxes are less than fully passed through to consumer pricesUndershiftingN/EN/EN/EN/EN/E
Specific excise†37.73‡UniformThe effect of cigarette taxation on prices: an empirical analysis using local-level data.34 201251 610.6Cigarette excise taxes are overshifted at both the state and local levels of governmentN/EOvershiftingN/EN/EN/EN/EN/E
Specific excise†37.73‡UniformWho pays cigarette taxes? The impact of consumer price search.35 201353 117.6Taxes are overshifted to smokers of light cigarettesTaxes undershifted to heavy smokers, those who buy cartons and consumers who live near the border of a lower tax stateOvershiftingN/EN/EDiscounts on buying cartonsN/EN/E
Specific excise†37.38‡UniformDoes every US smoker bear the same cigarette tax?36 201455 047.7Overshifting for smokers of premium brands who purchased by pack outside Indian reservationsExcise tax was undershifted to some smoker’s price-minimising strategiesOvershiftingN/EN/EPrice reductions on purchase of cartons, buying on Indian reservations or buying generic brandsN/EN/E
Specific excise†37.38‡UniformContinued implications of taxing RYO tobacco as pipe tobacco in the USA.50 201455 047.7N/EN/EN/EN/ETobacco manufacturers repackaged roll-your-own tobacco as pipe tobaccoN/EN/EN/E
Specific excise†37.81‡UniformTobacco product prices before and after a state-wide tobacco tax increase.89 201657 927.5Overshifting of the tobacco tax to consumersAbsentOvershiftingN/EN/EN/EN/EN/E
Specific excise†37.81‡UniformExploring impacts of taxes and hospitality bans on cigarette prices and smoking prevalence using a large dataset of cigarette prices at stores 2001–2011, USA.37 201759 957.7N/ECigarette excise taxes were undershifted and pass-through rates were slightly higher in areas with hospitality bansUndershiftingN/EN/EN/EN/EN/E
Specific excise†37.76‡UniformMind the gap: changes in cigarette prices after California’s tax increase.38 201965 280.6Overshifting of tax across all brands, greater at higher price points (more for ultra-premium than premium and for premium than value brand)Undershifting was evident in neighbourhoods with more African-American and Hispanic residentsOvershiftingN/EN/EAfter tax increase, prices were significantly discounted, and more stores advertised a discount on cigarettesN/EN/E
Specific excise†37.76‡UniformTI promotions and pricing after tax increases: an analysis of internal industry documents.39 201965 280.6Tobacco companies overshifted tax after the US federal tax doubled in 1983Lowered manufacturer price to undershift smaller tax increasesBothN/EN/EIncreased promotions at tax differential stores/border stores after tax increases in neighbouring statesN/EN/E
Europe (23 countries)Mixed excise57% excise tax rate on the most popular price categoryYesAn analysis of TI pricing strategies in 23 European Union countries using commercial pricing data.53 2019N/EUndershifting in cheap segments of cigarette market. TI maintains or increases price gap.N/EN/EN/EN/EN/EN/E
Spain Mixed excise64.1UniformNoThe Spanish tobacco tax loopholes and their consequences.51 201231 720.1N/EN/EN/ETI marketed cheaper alternative tobacco productsN/EN/EN/EN/E
Czech Republic Mixed excise60.9UniformYesTI manipulation of tobacco excise and tobacco advertising policies in the Czech Republic: an analysis of TI documents.12 201229 047.2The TI is overshifting tax increasesAbsentOvershiftingN/EN/EN/EN/EN/E
New Zealand Specific excise64.16*UniformThe impact of an increase in excise tax on the retail price of tobacco in New Zealand.47 201537 475.1Overshifting tax on premium, mainstream and RYO brandsUndershifting excise tax on the budget brandBothN/EN/EN/EN/EN/E
Taiwan Mixed excise48TieredNoExploiting a low tax system: non-tax-induced cigarette price increases in Taiwan 2011–2016.54 201950 592.5As a result of low and unchanged tobacco taxes tobacco companies overshifted to increase the real price of cigarettesAbsentOvershiftingN/EN/EN/EN/EN/E
Total HICs (22 studies) 17 12 3 2 6 2 2
Upper middle income countries
South Africa Specific excise32.44UniformIndustry responses to the tobacco excise tax increases in South Africa.66 200610 518.4Between 1990 and 2005, the industry increased its real retail rate by more than the increase in the real excise tax to increase its revenueAbsentTI overshifted between 1990 and 2005N/EN/EN/EN/EN/E
Specific excise40.12UniformThe effect of excise tax increases on cigarette prices in South Africa.55 201712 703.4Between 1994 and 2010, the TI increased retail price of cigarettes twice a year: in March in response to the excise tax increase, and in July/ August largely independent of the price.Since 2010, the excise tax was substantially undershiftedUndershiftingN/EN/EN/EN/EN/E
Mexico Mixed excise52UniformNoSelf-reported price of cigarettes, consumption and compensatory behaviours in a cohort of Mexican smokers before and after a cigarette tax increase.56 201015 260.6N/ETobacco taxes undershifted on cheaper national brandsUndershiftingN/EN/EN/EN/EN/E
Mixed excise52.8UniformNoTax, price and cigarette brand preferences: a longitudinal study of adult smokers from the ITC Mexico Survey.57 201317 373.8N/ETobacco taxes undershifted on national/discount brandsUndershiftingN/EN/EN/EN/EN/E
China Mixed excise26.2TieredNoCan increases in the cigarette tax rate be linked to cigarette retail prices? Solving mysteries related to the cigarette pricing mechanism in China.65)201211 197.5AbsentExcise tax increase in China does not result in increase in retail price of cigarettesUndershiftingN/EN/EN/EN/EN/E
Thailand Mixed exciseN/ATieredYesThailand: winning battles, but the war’s far from over.61 20007302.8AbsentTTCs have been absorbing tax increasesUndershiftingIntroduced cheaper brandsN/EN/EN/EN/E
Turkey Mixed excise66.11UniformNoAntitobacco control industry strategies in Turkey.60 201828 139.1N/EIn 2011, TTCs undershifted taxes to reduce the amount consumers had to payUndershiftingManufactured slim, super-slim cigarettes and flavoured cigarettes and TI manufactured more varieties of productsN/EN/EN/EN/E
Mauritius Specific excise70.50UniformTI tactics in response to cigarette excise tax increases in Mauritius.64 201923 942.1TI overshifted the tax increase on premium and popular brand cigarettesSubstantially undershifted tax increase for economy cigarettesBothN/EN/EN/EN/EN/E
Lower middle income countries
Ukraine Mixed excise54UniformYesEconomic and public health impact of 2007–2010 tobacco tax increases in Ukraine.49 20118218.8Larger tax increases led to overshifting of taxesSmaller tax increases were undershiftedBothN/EN/EN/EN/EN/E
Indonesia Specific excise44*TieredThe tobacco excise system in Indonesia: hindering effective tobacco control for health.69 20098021.7AbsentExcise tax is being absorbed by firms rather than being passed on to consumersUndershiftingN/EFirms reduced their production levels to fall within lower tax bracketsN/EN/EN/E
Specific excise49.45TieredFirms’ performance under a different cigarette tax system: empirical evidence from Indonesian cigarette manufacturing firms.58 201811 646.4N/EThere is presence of tax undershiftingUndershiftingN/EN/EN/EN/EN/E
Specific excise49.45TieredCigarette prices in a complex cigarette tax system: empirical evidence from Indonesia.59 201912 301.7AbsentTax is partially passed on to consumersUndershiftingN/EN/EN/EN/EN/E
Pakistan Specific excise45.79TieredSmoke screen: estimating the tax pass-through to cigarette prices in Pakistan.63 20164410.4N/ETaxes are undershifted, more for budget and midrange brands as compared with premium brandsUndershiftingN/EN/EN/EN/EN/E
Bangladesh Ad valorem excise56TieredA decade of cigarette taxation in Bangladesh: lessons learnt for tobacco control.62 20194950.7Increased prices at the high end of the marketLower rate of excise tax for the low-price tier incentivised the expansion of the market for low-price cigarettesUndershiftingDownward brand substitution (from high to low price cigarettes).
Upward product substitution (from bidis to low-priced cigarettes),
TI pricing undermines tobacco tax policy: a tale from Bangladesh.20 2020*4950.7Overshifting for brands at high end of the tiered systemUndershifting for brands in the low tiersUndershiftingN/EN/EN/EN/EN/E
Total LMICs (15 studies) 6 14 --- 3 1 0 0 0
Total (37 studies) 23 26 --- 6 3 6 2 2
  • *Excise tax proportion of price (%) quoted for the previous year due to data availability.

  • †Data for GDP per capita, PPP at the time of study (current international $) are presented for 2019 as 2020 data were unavailable.

  • ‡Cigarettes in the USA are taxed at both the federal and state levels, so taxes will vary within country.

  • FM, factory made; HICs, high-income countries; RYO, roll-your-own; TI, tobacco industry.