Dec 10, 2011

Sin tax: Heavily taxing our smokes ...


Rant mode: ON

Cigarette prices have increased dramatically over the past week. Today I paid more than double the price last week for a pack of Camel Blue. Yep, no more Camel Lights!

Smoking is injurious to health. Though there is a continuous debate about the risks of passive second hand smoke, the general consensus among us all is that cigarette smoking puts you and other around you at risk. I believe so too.

There is absolutely no doubt, cigarette smoking is a prominent public health concern in the Maldives, especially with almost 50% prevalence rate in youth demographic. Health Ministry officials must be planning and working on clever ways to deter smokers, or so I assume. I assume, because I've not seen many anti-smoking campaigns in the country. Except to periodically increase excise tax of cigarettes.

It seems our government is on a tax spree these days. They are taxing anything and everything, so there is no reason why cigarettes should not be taxed, especially when tax money is used to build, run and maintain public services — including health facilities. Sin tax for the betterment of the country? Sure!

Simply put, if you are responsible for paying the hospital bills (read: Madhana, national insurance plan) for a group of people, you will want them to refrain from damaging their health. That is a no brainer. Though some people advocate that the government should not try to be the moral compass for smokers, I personally believe that, the government has every right to help the citizens stay healthy.

However, I vehemently disagree with the method employed by the government to curb cigarette smoking. Doubling or tripling excise taxes and thus exponentially increasing the retail price of cigarettes feels lot less like a Government initiative to discourage smoking but more like a callous effort to balance the national budget.

This is the Government we are talking about and I don't suppose we  need to tell them that cigarettes are addictive in nature and that addiction plays an important role in the decision making and purchasing process of smokers. Any regulation that limits smoking or freedom of smokers will be met by stark criticism.

Every society on this planet has its vice. Maldives being a muslim country, the only legal vice we can afford to indulge in is smoking. Drastic changes in prices of an addictive product like cigarettes may actually have unintended consequences. Off the top of my head, here is what comes to mind.

Craving will triumph price. It won't reduce the number of smokers. Smoking is addictive. Price elasticity of demand does not apply to cigarettes. An increase in cigarette prices has had nil to little impact in consumption. Cigarettes remain price inelastic. A price increase has never diminished the number of smokers in a community. However, there is some indication that it may deter potential smokers who light up for the first time. This is the only group of people who will respond to a price increase.

Cheap cigarettes will flourish. This may actually make people smoke more. We all want to smoke fresh top brand cigarettes but when you can't afford the premium, you settle for cheap sub-standard products. Used to smoke Camel Lights? Now you will smoke Lucky Strike from Sri Lanka, Dunhill from Indonesia and Marlboro from China. Cheap cigarettes will flood the market. This will again put existing smokers at more risk. Not good.

Smuggled and contraband cigarettes. Cheap cigarettes for everyone and a decrease in government revenue. If there is enough demand for a product or service, someone will surface somewhere to provide just that. When onerous taxes are levied on cigarettes it will induce smuggling and open up the market for illicit traders to cater for consumer demand for cheaper cigarettes. This will push the trade underground and off the books. Total tax-paid industry volume of cigarettes may decrease. Not good.

Increase in crime rate and corruption. If you can't afford to feed your addiction, you are bound to make hasty decisions which might involve participating in illegal activities. Criminal networks that specialize in cigarette smuggling and street vending operate more comfortably in small countries with high cigarette tax but lack proper monitoring controls. Also, the level of tobacco smuggling tends to rise with the degree of corruption in a country. Naturally.

If the rationale of this sudden increase in excise tax is to reduce smoking amongst the population, that is a sadly misinformed and unfortunate decision. Personally, I think the only way to significantly reduce cigarette consumption in the country is through early preventive education starting from childhood. Price alone won't change anything, not with smokers.

The average politician may think that a staggering price increase may make Maldives slowly and diffidently quit smoking. I think not, it will just make us go more broke!

That enough ranting. Now I need a Dunhill Light.

Rant mode: OFF



Anonymous said...

good post man

//Sub/Corpus said...

Anonymous ::
Thank you ... :)

Anonymous said...

From "Curbing the Epidemic: governments and the economics of tobacco control",,contentMDK:20365226~menuPK:376607~pagePK:148956~piPK:216618~theSitePK:376601,00.html#7

Anonymous said...

good article,
I feel there is too much of personal thoughts and obsevetions than real facts although a little bit of jargon is used.Recent evidence shows that price increase is the best option to decrease the tobacco use in a country, and price is a significant determinant of cigarette demand among youth in lower-income countries, and the price may be used as a policy tool to curb smoking in the developing world.
so i think what you are talking is just bull-shit.
why should others pay for your ADDICTION!!

DeCicca, Philip, Don Kenkel, and Alan Mathios (2008), "Cigarette Taxes and the Transition from Youth to Adult Smoking: Smoking Initiation, Cessation, and Participation", Journal of Health Economics, 27(4):904-917.

Carpenter, Christopher and Philip J Cook (2008), “Cigarette Taxes and Youth Smoking: New Evidence from National, State, and Local Youth Risk Behaviour Surveys”, Journal of Health Economics, 27:287-299.

Kostova, Deliana, Hana Ross, Evan Blecher, and Sara Markowitz (2010), “Prices and Cigarette Demand: Evidence from Youth Tobacco Use in Developing Countries”, NBER Working Papers 15781.

Anonymous said...

I am sorry you need a lot of psychological support to overcome the addiction. And there is not much available here. I hope a good chunk of maoney generated would be used to treat addistion and spend on people like you who have enough sense to use a drug which is legal just for the satisfaction for yourself... injuring you and others around.
And there is enough evidence to show that smoking is HARAM in Islam... please get the opinion from an islamic scholar.
good wishes

Afaal said...

Hi Subcorpus
I wirk for the Tobacco Control Board established under the Tobacco Control Act of Maldives.
Yes taxation is one successful measure to curb smoking. This work has been done for a long time and I am one person who has worked on these issues for over 10 years in Maldives now. Finally someone has listened to the tax issue. In 2001, Myself and an Riaz Shareef did a research as part of south east asia economics of tobacco control published here
Maldives still has the lowest tax incidence on tobacco in the region. Multiple taxation is crucial.
In addition to this, there are number of regulations that include demand reduction, including smoke free places, cessation clinics, etc to ensure that all angles are covered.
Smoking is and will be the only cause that has the biggest burden on the national health system in this country with the current prevalence that you have mentioned.
Join with us and lets fight this epidemic. Tobacco is now the world's largest killer!

buy cigarettes said...

We can't say that this is really surprising at all. The government wants to do two opposite things, discourage smoking and preserve tax revenue from "sin products."

//Sub/Corpus said...

buy cigarettes ::
Seems right, but so wrong ...

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