...Introduction: The demand for any commodity is defined as inelastic when the percentage change in quantity demanded is less than the percentage change in price. Goods that are used in everyday life are considered to have inelastic demand simply because of their frequent use and an increase in price only slightly alters the change in quantity demanded. Similarly the number of substitutes available tend to define the elasticity of demand and the proportion of income spent by a person on purchasing the product. The inelastic demand curve is as follows: (Economics13 n.d.) In case of cigarettes, the price elasticity measured for different countries by WHO in their study was less than -1 or inelastic and the addictive nature of cigarettes being cited as the main reason for it. The study however does point out that if the prices are increased for a longer period, the demand might in fact be elastic as people would be impacted more by the increase in prices. The research further suggested that the demand elasticity varies amongst poor and rich countries along with the population demographics. (Perucic, 2012) In general when the prices are increased or taxes are raised on inelastic products, the beneficiary is often the producer or the government as the tax burden would be on the consumers. A tax on cigarettes would mean the consumers bearing a greater tax incidence which would in fact discourage them to spend more on tobacco products. (Tax-inelastic-demand n.d.) As seen in the...
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...Effects of Taxation on Cigarette Smoking In economics the demand elasticity refers to the sensitivity of the quantity demand for a product to the changes in price. This relationship correlates to the basic law of demand which states that if the price of a product or good increase, then the consumer demand would fall and decrease because of the change. However not all products follow this fundamental theory. In fact products that are considered addictive substances, such as tobacco and cigarettes can be the exception to this basic law because we must take into account not just the pricing but other factors such as time, usage, limitations, and restrictions. Imposing higher taxes on cigarettes will have a mix effect as to who the price increase affects. As noted in the Chaloupka article, “The effects of prices and tobacco”, paying higher taxes on cigarettes as well as placing stronger controls as to who is able to purchase them will lead to a reduction in the consumption of cigarette smoking. The article is supported by studies done in the early eighties and late ninnies, confirming the reduction is towards both adults and youths alike. However price sensitivity is significant in its responsiveness between youths and young adults than compared to adults; up to three times more sensitive. Some reasons as to why this may be, is due to the strict regulations and laws set by states and local governments that enforce and control the purchase of tobacco products to the consumer...
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...Term Paper For B.B.A(Hon's) Second Year Course Netrakona Govt. College Department of Management Topics : Taxes on Tobacco in Bangladesh Date : Letter of Transmittal Date: 25/04/2014 A.K.M. Khairul Hasan Lecturer Department of Management Netrakona Govt. College Netrakona Subject: Submission of Term paper on Taxes on Tobacco in Bangladesh" Sir, This is my pleasure to submit this term paper on "Taxes on Tobacco in Bangladesh" under the Supervisor. A.K.M Khairul Hasan. I have done my level best to completed Term paper in time. The whole experience of this Term paper enables me to get an insight in to the real life situation. I have really enjoyed working in this field this Term paper prepared by me as a fundamental issue. I hope This Term paper will enable to find out real scenario of on existing Tues or tobacco in Bangladesh. I would like to thank you for your supportive suggestion and helping me to carry on this study. With out your direct helps this term paper would not be prepared by me. Abdul Aziz Roll No: 9822765 Registration No: 1800488 Session: 2010-2011 B.B.A (Hons.) Second year Class Roll: 227 Netrakona Govt. College Netrakona. Author's Declaration of Originality I hereby certify, that I am the sole author of this Term paper on "Taxes on Tobacco in -Bangladesh". it is prepared for a partial fulfillment of BBA degree. To the best of my knowledge my Term paper does not infringe upon anyone's copyright nor violate any proprietary rights. Any...
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...Abstract Cigarette and Tobacco taxation has been a hot topic for years. Typically, the taxing of this product is accepted as there are health concerns associated with the consumption of tobacco products. The concept of raising cigarette taxes aligns with goals of increasing revenue for local, state and federal governments, and also works to increase the overall public health of the country. Although the taxation is widely accepted, there are concerns associated with who the taxation effects primarily, how funds are being utilized and issues with meeting budget goals with the earned revenue. This paper addresses each of these topics in an effort to identify the effectiveness of cigarette and tobacco taxation. Introduction The concern associated with the health risks of tobacco use and cigarettes began as early as the 1930’s. The ill effects of tobacco were studied by epidemiologists in long term case studies to assess the increase of lung cancer mortality to smoking. The findings were considered merely casual by Surgeon General Leroy Burney in 1957. As a few years passed, the concern between the relationship of smoking and health grew. This led to The American Cancer Society, The American Heart Association , The National Tuberculosis Association and the American Public Health Association collaborating together to address a letter to President Kennedy. In this letter they asked for a call to action on the issue of cigarette smoking. The Kennedy Administration...
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...a “norm” within society. The government has policies on cigarettes that try to help reduce smoking, but in an effort to make more revenue the taxes that are placed on cigarettes are not so high that consumer usage will drastically decline and affect government revenue. The government has imposed quotas and tariffs on cigarettes to help regulate the importation of them. A country like the United States has a high border tariff, which the government likes, because its economic level of exporting is high. Countries that are considered to be third-world or developing nations tend to have low or no border tariffs on tobacco. By placing a tariff on tobacco, consumers lose, but the government earns income from it in the form of taxes. Quotas on the other hand, take some of what the consumers lose and give it to the suppliers who are fortunate enough to have their product shipped as part of the quota. For example, the few tobacco farmers in the United States who are granted quotas by the government earn a lot of money mainly because they have no shipping cost – government pays for their shipping cost. The government knows that cigarettes are a bad commodity but since the government makes money off of it, taxes are put in place. The taxes are not only put in place for the government to make money but an effort to reduce smoking, particularly amongst young people (MBN, 9). Young people are targeted the most because studies have shown that 80% of adult smokers started smoking when they...
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...Note: These essays are for revision purposes giving suggestions for how to answer questions. Don’t try to pass them off as your own work. AS Micro Essays 1.Evaluate the case for and against governments intervening to try to stabilise the price of copper, for example, through setting up a buffer stock scheme. 2.Evaluate advantages and disadvantages of various methods of government intervention to correct market failure arising from aircraft emissions. 3. Discuss the likely effects on the retail market for coffee if there is a large increase in city centre rents. 4.In the UK, students face increasing tuition fees. Discuss the benefits and costs to society of abolishing all tuition fees. 5.Discuss three policies to reduce the level of cigarette smoking amongst under 21s. 6.Discuss the extent to which governments should subsidise companies who are developing cars which run on clean fuels such as hydrogen? 7.Discuss whether the government is mistaken to worry about monopoly power? 8.Discuss the advantages and disadvantages of the government intervening in agricultural markets? 9.Discuss the effects on UK business of a rise in fuel prices. 10. Discuss whether the government should end free health care for people and make them take out private health care insurance like in the US? 11. Discuss the role that pollution permits could play in reducing global warming 12. Discuss the case for implementing a congestion charge for driving into Birmingham city centre...
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...Philip Morris International (PMI), the global leader in tobacco products, is currently experiencing risks to its profitability and future operations, particularly from increasing taxes and prohibitive public policy. PMI must balance strategies which address the heightening involvement of western governments in the tobacco industry with the growth opportunities in developing markets. The following outlines the three most significant risks facing PMI and identifies existing strategies in comparison to competitors. The first significant risk facing PMI is government restrictions on advertising. Governments globally are increasingly restricting the means by which PMI can actively market to consumers. As a result, the branded tobacco industry has been limited to select sponsorship and online marketing efforts. The latest restriction involves mandating plain packaging. Australia is set to become the first country to introduce plain packaging for cigarettes in December 2012, thereby eliminating a critical brand marketing vehicle for the industry, a precedent that will have worldwide repercussions. Such measures are anticipated to expand to other regions, which restrict PMI’s ability to launch new (and differentiated) brands and to command a premium price. In the event that the tobacco product industry becomes a commodity market, with no way to differentiate other than price, production cost-reduction initiatives will serve to partially mitigate against the risk to profitability. In...
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...Differential Effects of Cigarette Price on Youth Smoking Intensity 1Department of Economics, University of Illinois at Chicago 2Health Research and Policy Centers, University of Illinois at Chicago 3Health Economics Program, National Bureau of Economic Research ACKNOWLEDGEMENTS Support for this research was provided by grants from The Robert Wood Johnson Foundation (ImpacTeen – A Policy Research Partnership to Reduce Youth Substance Use) and the Centers for Disease Control and Prevention (Price, Availability and Youth Tobacco Use) to the University of Illinois at Chicago. We thank Lloyd D. Johnston and Patrick J. O’Malley of the University of Michigan’s Institute for Social Research for providing us with selected data from the 1992, 1993 and 1994 Monitoring the Future Surveys. The Monitoring the Future Project is supported by a grant from the National Institute on Drug Abuse Abstract Objectives: Data from the 1992, 1993, and 1994 Monitoring the Future Surveys were used to investigate the differential effects of cigarette price on the intensity of youth cigarette smoking. Methods: Respondents are classified into nonsmokers; individuals who smoked less than one cigarette per day; individuals who smoked one to five cigarettes per day; individuals who smoked one-half pack a day; and individuals who smoked one pack or more a day. A Threshold of Change Model was estimated with information on cigarette prices as the main explanatory variables. Results: Dummy variables...
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...Introduction Tobacco smoking or cigarette smoking is the practice of burning cigarette, taking the smoke into the mouth and then releasing it. This practice dates back as early as 5,000 – 3,000 B.C. but was introduced to Eurasia in the late 17th century where it has also been a commonly traded product. The practice received speculations and a lot of criticisms since it was first introduced but it somehow made its way inside the society and became widespread upon the invention of automated cigarette-rolling apparatus. The tobacco has been first introduced to other countries before reaching the Philippines. The idea of smoking tobacco first came from the Arawak Indians in 1492 that was noticed by Christopher Columbus. Seven years later, Amerigo Vespucci found out that the inhabitants in an island near Venezuela have already been practicing chewing dried leaves. In 1591, Mexico has already been growing tobacco at an increasing rate. It was believed that the tobacco was introduced by the Spaniards and Portuguese to mainland Europe, East Indies and Asia while they are on an expedition for searching for spices and spreading Christianity. Cigarette smoking became one of the highly sought after vice in the Philippines because of the affordable price of each stick ranging from seventy-five centavos to 2 pesos each, depending on its brand. The Philippine government came up with an idea of increasing the taxes imposed upon alcoholic beverages and cigarette sticks in order to minimize...
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...DISCUSSION QUESTIONS: CHAPTER 1 1. Jessica's friend Zachary once stated that he couldn't understand why someone would take a tax course. Why is this a rather naive view? A clear understanding of the role of taxes in everyday decisions will help people make informed decisions about the value of studying taxation or pursuing a career. Once you know how taxes effect your money, you can better plan for future expenses, gifts, or investments. 2. What are some aspect of business that require knowledge of taxation? What are some aspects of personal finance that require knowledge of taxation? Taxes are significant costs that influence many basic business, investment, and personal decision. Business decisions: what organization form to take , where to locate, how to compensate employees, appropriate debt mix, owning vs. renting equipment and property, how to distribute profits, and so forth. Investment decisions: alternative methods for saving for education or retirement, and so forth. Personal finance decisions: evaluation job offers, gift or estate planning , owning vs. renting home, and so forth. 3. Describe some ways in which taxes affect the political process in the United States. 4. Courtney recently received a speeding ticket on her way to the university. Her fine was $200. Is this considered a tax? Why or why not? 5. Marlon and Latoya recently started building a house. They has to pay $300 to the county government for a building permit. Is the...
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...Q 1. Cigarettes are often cited in economics texts as an example of a particular type of market failure. Identify that market failure, and illustrate the failure using an appropriate diagram. Ans. Cigarettes represents a market failure of externatilities. They are sited as negative externality as they affect the wellbeing of the bystander and the person neither pays nor receives any compensation for that negative effect. A smoker enjoys the puff of the smoke and the bystander inhales the fumes of the cigarette and indirectly suffers health hazards. And if the bystander fells sick because of the smoke as one reason he will not be compensated by the smoker for the ill- health and therefore, smoking has a negative impact on a person who has not paid for the cigarette and still has suffered a loss. This reduces the MSB by the extent of the negative effect on bystander; hence the socially efficient smoking is less than the free market level of smoking. A Negative Externality in Consumption can be analyzed by a decrease in the marginal social benefit of consumption below the marginal benefit to consumers. (If a smoker benefits $8.20 and non-smokers lose $4.00, then society as a whole benefits $4.20) S = MC D = MB 0 5,000 10,000 15,000 E Price of a pack of cigarettes Quantity of cigarettes $14 12 10 8 6 4 2 MSB MSB curve shifts downward by the amount of the externality --- the marginal external effect Q 2. Many economists believe that a Pigovian tax...
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...reduce the level of congestion in the UK with the like of increased petrol duty and increased taxes on new vehicles, better information on pollution levels and congestion and congestion free or congestion zone areas. With all these polices, the positives are always shadowed by the negatives. These polices will be aimed to revert people to using public transport such as the trains and buses instead of using there car to commute One way of reducing the level of congestion on UK roads is argued in extract C lines two to seven where by it highlights the solution of increasing taxes on petrol and charging per mile on road tax. As the population of the U.K has also been increasing over the last 40 years at an impressive rate, the number of cars registered has also been on the rise. In 2000 27.2 million cars were registered on UK roads and compared to today a total of 31.7 million. Due to an increase of over 4 million, this has resulted in a substantial increase in the number of vehicles on the road increasing congestion levels. By increasing the level of tax on petrol and diesel, it would put of buyers for filling up there cars and would resort to public transport that would be more cost effective. This would help to reduce the amount of cars on the road adding congestion in towns and cities as well as pollution levels. Unfortunately, it would be extremely hard to get the desired effect that this police brings. Due to petrol being an inelastic good, even...
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...water” which currently other countries face. (min1500words) 1.0 Introduction The use of cigarette for cigarette has been practiced for centuries. The cigarette plant has been grown in America since the 17th century and cigarette has been used in various forms since. The form of cigarette cigarette by rolling the leaves in fine paper was frequently done by hand for those who practiced it, which limited the habit of cigarette. In 1865, a man named Washington Duke from North Carolina began to roll cigarettes and sell them to others for profit. In 1883, James Bonsack invented a machine that could roll cigarettes and produce thousands per day. Bonsack began a business called the American Cigarette Company, which was the first company to produce cigarettes on a large scale. The mechanized production of cigarettes widely increased the popularity of cigarette, and made cigarettes much more accessible to those who wanted to smoke. Premade cigarettes were available for those who did not wish to roll their own cigarette and cigarettes became available in quantities by the pack. In the late 19th century cigarettes were being sold in packs and marketed throughout the United States. Cigarettes were packaged into containers of ten that were marked with the name of the company that manufactured them and various logos or designs. The packs of ten cigarettes sold for five cents each. Cigarette packages were made of paper with a small card inserted to reinforce the package. These cards...
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...earnings are required to pay the same tax rate. There are arguments that consider the sales tax proportional because the same rate is evenly applied across low-, middle-, and high-income taxpayers. However application of the sales tax is regressive because the percentage of tax paid decreases with respect to total income as income levels increase. Lower-income tax payers pay the same dollar amount for particular goods as higher-income individuals, but at lower-income levels the tax represents a greater proportion of overall income and therefore the tax is actually, in application, regressive. Sales taxes on essentials like food, clothing, and housing also take up a larger percentage of lower-income individuals budget. The argument for proportionality of the tax is that higher-income individuals actually purchase more goods and more expensive goods. Because sales taxes in general do not take into account the economic or personal circumstances of the purchaser, and that the tax is not a personal income levy, both low- and highincome individuals will pay the same tax rate on the purchase of items. The sales tax is justifiably criticized for violating the vertical and horizontal equity premises of taxation. c. The $0.04 per gallon tax on gasoline in Florida is highly REGRESSIVE. An individual with $1,000 of taxable income pays the same amount on the purchase of 10 gallons of fuel as an individual with $50,000 of taxable...
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...INTRODUCTION Now that people increasingly pay more attention to environmental issues, they are manifested in all areas of life. Air pollution? Do not worry. Already a car powered by electricity or eco-gasoline or even grass. Water pollution? Do not worry. Already advanced wastewater treatment technologies. So what if the pollution is caused by the consumption of plastic bags? Not easy to answer. Let’s stand in the shoes of a public economist. The consumption of plastic bags brings a lot of benefits for everyone. If you are a manufacturer of plastic bags, you will get a lot of money as your profit. If you are a consumer of plastic bags, you will be satisfied with the benefits that they bring you. They are cheap, very light and of course, very easy to throw away after used. Now the problem has arisen. Have you ever wondered where plastic bags will be after discarded? We can say for sure that they do not disappear. They stay and pollute the environment. Environment Commissioner Janez Potocnik used to say: "The impact of this plastic waste can be seen littering our landscape, threatening our wildlife and accumulating as 'plastic soup' in the Pacific Ocean, which may cover more than 15,000,000 sq km," There will be a lot of people who do not use plastic bags but still have to suffer the consequences. Do you, consumers, have to compensate for them? Of course not. They are not your acquaintances, so you may think that it is ridiculous for a...
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