Distributional Accounting Impact Model of Tobacco Taxation
2021
As with other ‘sin taxes’, tobacco taxes are generally regarded as a highly cost-effective mechanism to reduce consumption while also considered to be regressive. This dichotomy undermines efforts to fully implement tobacco taxes at levels recommended by the WHO due to concerns of fairness. This article demonstrates when there are circumstances in which the impacts of additional tobacco taxes are not regressive, using a standard income-share accounting definition of tax burden.
The authors apply mathematical modelling and explore the hypothetical distributions in the net change in tobacco taxes and cigarette expenditures by income group, following an increase in tobacco taxation. Their findings question the doctrine that tobacco taxes are uniformly regressive from a standard income-share accounting view and point to the importance of the specific features of tax policy to shape a progressive approach to tobacco taxation. In such a framework tobacco tax increases are less likely to be regressive when accompanied by a broad framework of demand-side measures that enhance the capacity of low-income smokers to quit tobacco use.
Distributional Accounting Impact Model of Tobacco Taxation
Source:
Verguet S, Kearns PK, Rees VW. Questioning the Regressivity of Tobacco Taxes: A Distributional Accounting Impact Model of Increased Tobacco Taxation. Tobacco Control 2021; 30 (3): 245-257. http://dx.doi.org/10.1136/tobaccocontrol-2019-055315