Regressive or Progressive? : The Effect of Tobacco Taxes in Ukraine
Tobacco taxes are usually considered regressive, as the poorest individuals allocate larger shares of their budget toward the purchase of tobacco-related products. However, because these taxes also discourage tobacco use, some of the most adverse e...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/934621509107306525/Regressive-or-progressive-the-effect-of-tobacco-taxes-in-Ukraine http://hdl.handle.net/10986/28613 |
| Summary: | Tobacco taxes are usually considered
regressive, as the poorest individuals allocate larger
shares of their budget toward the purchase of
tobacco-related products. However, because these taxes also
discourage tobacco use, some of the most adverse effects and
their economic costs are reduced, including lower life
expectancy at birth, higher medical expenses, increased
years of disability among smokers, and the effects of
secondhand smoke. This paper projects the effects of an
increase in the tobacco tax on household welfare in Ukraine.
It considers three price-elasticity scenarios among income
deciles of the population. The results show that although
tobacco taxes are often criticized for being regressive in
the short run, in a more comprehensive scenario that
includes medical expenses and working years, the benefits of
tobacco taxes far exceed the increase in tax liability,
benefitting in large measure lower income households. The
results also indicate that lower health expenditure seems to
be the main driver, because of the reduction in
tobacco-related diseases that require expensive treatments.
Tobacco taxes are also associated with positive
distributional effects related to the higher long-term price
elasticities of tobacco consumption. |
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