A Research on Cigarette Demand and Regulation Policy of Cigarette
Date Issued
2010
Date
2010
Author(s)
Lin, Pei-Yu
Abstract
In order to response the requests from western countries, Taiwan Government continually practiced import liberation of foreign cigarettes and terminated tobaccos and wines monopoly in 1987. Furthermore, smoking not only increases the risk of getting disease but also augments the cost of medical treatment of national health insurance. In order to lower the smoking rate and subsidize the National Health Insurance, Taiwan Government continually carried out the Tobacco Hazards Prevention Act in 1997,change of the Tobacco and Alcohol Tax Law in 2002, and the Tobacco Health and Welfare Tax.
This paper aims to analysis the comprehensive influence Tobacco Hazards Prevention and of Tobacco Health and Welfare Tax on demand for cigarette in Taiwan. Annual time series data through 1971 to 2009 from Taiwan tare used to estimate the demand for cigarettes, in consideration of the import liberation of foreign cigarettes, of anti-smoking campaigns on cigarette case, of the Tobacco Hazards Prevention Act, of smoking-related health information, and of the Tobacco Health and Welfare Tax. Moreover, this paper hopes to provide government with suggestion about the amendment of cigarette management policy.
The results indicate that the price elasticities for domestic and imported cigarettes are -0.88and -0.47, respectively. The income elasticities are 0.06 for domestic and 0.18 for imported cigarettes and the cross-price elasticities are 0.40 for domestic and 0.63 for imported cigarettes through 1971 to 2009. Besides, the spread of cigarette health information, anti-smoking campaigns on cigarette case, and the Tobacco Health and Welfare Tax have had a significantly negative effect on domestic and imported cigarette consumption. In addition, opening the markets to imported cigarettes has had a significantly negative effect on domestic cigarette consumption, but had a significantly positive effect on imported cigarette consumption. Finally, Tobacco Hazards Prevention Act has a significantly negative effect on domestic cigarette consumption, but had an insignificantly effect on imported cigarette consumption.
Although Taiwan cigarette management policies are significant, their effects on domestic cigarettes are more significant than on imported cigarettes. We presume that imported cigarettes have a variety of categories, and some of them have high qualities. Therefore, imported cigarettes’ absolute value of price elasticity and income elasticity are smaller than domestic cigarettes’. Furthermore, the prices of cigarettes in Taiwan are still too low and raising the prices is an effective method for reducing the consumption on cigarette. For these reasons, in order to increase the influence on consumption of imported cigarettes, Taiwan Government should increase the amount of the Tobacco Health and Welfare Tax, and transform it from unit tax into ad valorem tax.
Subjects
cigarette management policy
the Tobacco Hazards Prevention Act
the Tobacco Health and Welfare Tax
cigarette demand
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