Effect of an Increase in Tax on Tobacco Consumption

TOPIC: TOBACCO TAXATION IN INDIA

CALCUTTA UNVIVERSITY

Bsc PART III EXAMINATION 2013

ECONOMICS HONOURS

PAPER VIIIB (TERM PAPER)

ROLL NO.: 3031-51-0044

REGISTRATION NO.: 031-1224-0204-10

TOPIC: TOBACCO TAXATION IN INDIA

CALCUTTA UNVIVERSITY

Bsc PART III EXAMINATION 2013

ECONOMICS HONOURS

PAPER VIIIB (TERM PAPER)

ROLL NO. : 3031-51-0044

REGISTRATION NO.: 031-1224-0204-10

CONTENTS

TOPIC

1.

2.

3.

4.

5.

6.

7.

8.

PAGE NO.

Abstract………………………………………………….1

Introduction……………………………………………...2

Problem …………………………………………………3

Literature Survey………………………………………...4

Data source and methodology…………………………...6

Analysis………………………………………………….7

Conclusion……………………………………………….13

References………………………………………………..14

ABSTRACT

Consumption of tobacco products leads to alarming health and economic costs. The most

easy and effective way to reduce the high rate of tobacco consumption in India would be

to increase the amount of tax levied on tobacco products. It will be shown that an

increase in the tax rate will not only lead to a reduction in tobacco consumption but also

lead to an increase in the government revenue.

Page no 1

INTRODUCTION

Consumption of cigarettes and other tobacco products leads to about a million deaths in

India, which has the second largest population of tobacco users in the world. Tobacco is

consumed in a variety of forms, from smoking tobacco products like bidis * and cigarettes

to different types of chewing tobacco products. This relatively high rate of tobacco

consumption is partly a result of a very low rate of tax on bidis and an inefficient and

complex system of taxing cigarettes1.

Tobacco taxes have been thought to satisfy Ramsey rule which states that consumption

taxes should be applied to goods with relatively inelastic demands so that welfare losses

associated with taxation will be minimized. More recently, many countries have

increased tobacco taxes to reduce tobacco use.

Assuming that there are social...