Tax hikes stem ciggie sales – for a while

Figures provided to Blue Skies China from government sources show cigarette sales plummeted following tobacco tax hikes – but have quickly recovered in subsequent years with no tax hike.

Cigarette sales see-saw

Figures from Customs & Excise on gross tax revenues breakdowns for tobacco products and tax rates of cigarettes can be used to calculate cigarette sales for periods between 2005 and 2015.

The figures show the 2009 budget decision to raise tobacco tax 50% coincided with a drop in cigarette sales to 2.75 billion cigarettes in 2009-10. Sales recovered 26% in 2010 – a 41.4% tax increase in 2011 then coincided with a 30% drop in sales for 2012-12. Sales once again recovered by around 27%; in 2014, an 11.8% increase in cigarette duty coincided with a 7% drop.

This see-saw effect has been noted by other researchers in other jurisdictions: Michelle Inness of the School of Business, University of Alberta, Julian Barling and Keith Rogers, of Queen’s University School of Business and Nick Turner, of Asper School of Business, University of Manitoba, writing in the Journal of Business of Ethics in 2007, noted that the effect of a tobacco price hike in three Canadian provinces dissipated three months later, suggesting there is a critical period for aggressive “de-marketing” of tobacco products following a price hike.

“From a public policy perspective, these findings are consistent with the suggestions that… the price of cigarettes can be used as a tool to de-market tobacco products and motivate smoking cessation. The period following a price change may represent a small but distinct window of opportunity,” they write.

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