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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The distributional impact of tobacco excise increases
Author:Van Walbeek, C.P.
Periodical:South African Journal of Economics
Geographic term:South Africa
income distribution
Abstract:The purpose of this paper was to examine the distributional impact of excise taxes on consumers of cigarettes in South Africa. Generally speaking, of all the controls available to reduce the consumption of tobacco, rapidly increasing excise taxes are the most effective. The price elasticity for cigarette demand in South Africa lies between -0.4 and -0.8, bringing it into the category of developing countries. Between 1990 and 2000 there was a 30 percent reduction in tobacco consumption because there was a 225 percent rise in excise duties, in other words prices were doubled in real terms. The price for a packet of cigarettes rose from R1.65 to R8.00, that is a price increase of 17 percent per year. The data for this paper were based on 1990 and 1995 Income and Expenditure Surveys. Although a reduction in tobacco consumption can be considered beneficial, it could be said to have a disproportionately detrimental impact on the poor. This would mean that cigarette taxes were regressive, which is undesirable from the point of view of social equity. The paper found that the price elasticity of cigarettes was inversely correlated with income, that is that poorer people adjust their cigarette consumption by a greater percentage reaction to price change than richer people do. Bibliogr., notes [ASC Leiden abstract]