The dire consequences of cigarette smoking and tobacco consumption are known to everyone.
Governments across nations have tried to curb the habit smoking through taxes on the tobacco
industry. In the United States itself there are federal and state specific taxes on cigarettes. In
news published in Washington Times in 2014, United Nations issued an approval for
countries globally to increase the taxes on cigarettes and other tobacco products. According to
this sanctions, the countries which have signed the anti tobacco agreement of UN will have to
enact an excise tax equal to at least 70 percent of the retail price of tobacco products. The World
Health Organization also resonated with the approval and said that the health costs that have to
be incurred because of tobacco related diseases and there are several evidences across countries,
where tobacco taxes have helped fight the ills of cigarette smoking. Some economists have
criticized UN’s step and have raised the issue that global uniform taxes will not have a huge
impact on smokers as more and more people will resort to smuggling or illegal methods. They
have also said that same tax structure cannot fit all economies. Mr. Arthur Laffer, an American
economist is also against the use of pictorial warnings over cigarette packs, as he believes that
these methods will not affect smokers.
Conventionally, policymakers have presented several arguments about controlling tobacco. One
of which is that demand for tobacco is considered to be highly inelastic, therefore increasing the
taxes might lead to a decrease in cigarette consumption but that effect will be very small.
Another concern raised by the critics is that higher tax rates will reduce government revenues
and will lead to a massive increase in smuggling, thus keeping cigarette smoking high but
reducing government revenues. Lastly, there have been concerns that higher cigarette taxes will
have a lopsided impact on poor consumers. Present tobacco taxes do take up a higher percentage
of the income of poor consumers as compared to that of the rich consumers.
However evidence that taxes have helped reduce tobacco consumption cannot be ignored. It is
estimated that a 10 percent hike in the cost of cigarettes is estimated to lessen the demand of by 4
per cent in developed nations and by 8 per cent in underdeveloped nations. Also governments
earn massive revenues from high taxes which is considered as a way to cover the costs for
medical expenses and aid that the government provides in equipping the country with measures
on the whole distributional impact of the total tax and spending arrangement than about the rate
of individual taxes. In China, estimates show that a 10 percent increase in the cigarette tax is
expected to decrease consumption by 5 percent and increase revenue by 5 percent. Therefore
argument that high increases in taxes will lead to deadweight losses and there will be no further
increase in revenues is unfounded. In high income countries, higher taxes have led to increase in
the government revenues and in poor countries, consumers are usually more responsive to price
increases than rich consumers, so poor countries will see a further decline in tobacco related
diseases as a result of tax hike, which would relive a lot of financial burden from them.
Presently tobacco use causes around 5 million deaths every year. Hence governments should
work hard to raise awareness amongst people to understand the health effects of this addiction.
As effective as taxes are, there is a certain limit up to which they will work. Governments and
economists in different countries should formulate an appropriate tax rate which would be
suitable for their respective regions so as to not hit the poor consumers hard. At the same time
governments should take up more effective programmes which deter people to smoke and raise
awareness among the young population which are more prone to be attracted towards trying new
Johnson, Drew and Alex Swoyer. "U.N. approves increased global tobacco tax during secret
session."Washington Times. 14 Oct. 2014. 25 Nov. 2014