Update the Recurring Sin Tax Law that Was Newly Implemented by Benigno Aquino

Sin taxes account for approximately 4.5 percent of Texas’ state tax revenue (Litten). Tobacco taxes can be divided into two categories: cigarettes or cigars and other tobacco products. Cigarette taxes in 1931 where as low as three cents a back, but now the state has raised the taxes to $1.41 per a pack of cigarettes (Minton). Alcoholic beverages are taxed based on the type of alcohol, for example, liquor, beer, wine, and malt liquor. Also each alcoholic beverage have a mixed beverage sales tax and mixed beverage gross receipts tax. These taxes have shown a trend of being reduced throughout the past 4 years.

This article is very informative toward the purpose of increasing excise taxes. I believe that Joey Connor did an excellent job at pointing out the effects of the tax increase on tobacco products. He provided information on previous tax rates, so readers can have a clear idea of the increase percentage of taxes. He also supported his arguments by incorporating other sources in his article. For instance, he incorporated the analysis done by the National Public Radio on how the increase in price of cigarettes will affect the consumer behavior.

Taxing unhealthy food and beverages is practiced internationally and was examined extensively in the 2011 United Nations summit as a means to encourage healthy dietary choices among individuals. As interest in this area grows, more research is needed to study the relationship between food taxation and an individual’s food choice, so informed policy can be created and successfully implemented. Economics plays an important role in persuading an individual to buy a product. As the price of a food product increases, theoretically,

if there is a high “sin tax” (i.e., taxes levied on goods such as alcohol and tobacco products that are

Tobacco industries are categorized as oligopolies. Oligopoly, according to McConnell Brue Flyyn’s textbook, is “characterized by multiple firms, one or more of which will produce a significant portion of industry output.” Tobacco had been present in Indonesia since the 1600s. It was brought in to Java Island by Portuguese merchants. At first, Indonesia’s cigarettes were handmade at home. They were rolled and wrapped with cornhusks, but that was a long time ago. The Indonesian tobacco industry today is characterized by the dominance of big three tobacco companies---Gudang Garam, Bentoel, and Sampoerna. These

Resulting, as shown in figure 3, in reduced consumption and creating a better socially efficient outcome. Comparing figures 2 and 3, it is evident that without the tax, overconsumption can occur as external costs are not always implied meaning decreased awareness of the issue.

However, the tax has been a concerned of many people. Some, especially those in the health field, welcome the tax. Yet, this tax is criticized by other people who are in the business of selling food and drinks with high sugar. It has enormous potential effects on retailers and soft drink producers, because tax on sugar will increase prices of foods and drinks with a high level of sugar, and it also will lead to increase the costs of production for business. According to the law of demand, as price rises, consumers willing and able to buy less, the quantity demands falls. Also, the law of supply shows that a rise in the costs of production will lead to a decrease in supply. Hence, business of sugary foods and drinks will decrease the supply, and business will reduce sales. In addition, Price elasticity of demand indicates that the demands of a good is affected by change in the price of the good. (Anderton, A., 2008) A report found that the price elasticity of the demand for drinks with high sugar is -1.6 (Colchero, M., 2015). Thus, the report shows that the price elasticity of demand for drinks with high sugar is elastic, which means the change in price of sugar will lead to high change in demand of sugar. Consequently, through the tax to increase price can effectively influence the consumption of sugar, which lead to reduced consumption. Nevertheless, it is unlikely that a single way of a tax would be effective in reducing sugar intakes. Government involves restrictions on price, promotions and advertisement, product reforestation and portion size reduction, implemented in parallel is likely more

excise taxes1. There has been recent interest in increasing the “sin tax” for products such as

There are many cities who have implemented bans on cigarettes, but China overall is still the leading consumer of cigarettes in the world. A countrywide tax on cigarettes has been proposed to their Ministry of Finance, and Ministry of Economics and Trade, but a decision has yet to be made. Tobacco production provides substantial revenue to the government and a tax increase will have a significant effect on the central government and reduction of consumption of cigarettes. According to a study done by the group proposing the tax, “a 25% tax increase will have an overall monetary benefit that far exceeds the negative impact on the cigarette industry and tobacco farmers. In financial terms alone, not counting the number of lives saved and medical care cost savings, the gain of the central government tax revenue (24.58 billion Yuan) twice exceeds the loss of tobacco farmers’ earnings, tobacco industry workers’ earning and loss of industry and local government revenue (11.74 billion Yuan)” (Hu TW 107). There many components to this calculation, but some factors included the reduction of cigarette consumption, the number of lives saved, savings in medical care costs, gains in productivity due to avoidance of premature death, industry revenue lost, lost jobs in cigarette industry, loss of tobacco income, and loss of local government

“Sin” taxes have been proven as a way to curtail known unhealthy behaviors. Soda taxes are most accepted if taxes collected are earmarked for health specific programs (Chaufin et al., 2010). The cons are the consumers are the voters and taxing may equate to loss of votes, taxing may not be equitable to individuals that do not have the disease, and finally, an undue burden may be placed on lower socio-economic demographics as these groups often have limited access to food vendors that primarily sale what would be considered taxed foods. Though these sin taxes are proven to work well with tobacco and alcohol consumption, altering a persons’ diet needs to be more individualized and realistically approached. Lower socio-economic individuals should not feel added burden as a tax; which would be a negative impact (Kuchar et al., 2005). Legality issues are regarded as low, but would require state government support to enact. This would likely not be popularly accepted and have a minimal impact for any increase in tax rate.

Most commonly, sin taxes are excise or consumption taxes that charge fees for guilty pleasures or human indulgence. (Lorenzi, Sin Taxes 60) Sin taxes, therefore, are intended to encourage citizens to consume or use taxed items responsibly or discourage behavior associated with the consumption of taxed items. Goods or services generally taxed through sin tax policy have some common characteristics including inelastic demand, promote behavior that is harmful to the individual, and promote behavior that is harmful to others. (Lorenzi, Sin Taxes 60) Goods or services targeted by sin taxes have an inelastic demand because they are generally habitual, addictive, or highly pleasurable. (Lorenzi, Sin Taxes 60) Further, these goods or services are targeted by sin tax legislation because consuming or utilizing the good or services can lead to self-destructive behavior, negative consequences for communities, and generally are considered socially undesirable. Thus, sin taxes are not prohibitive; citizens are allowed to consume targeted goods and services as long as the tax is not steep enough to make consumption of the good or service impossible. (Viscusi 556) Further, the voluntary nature of sin taxes is generally more tolerable than involuntary nature of income taxes. (Schmidt, Barr and Swanson 1677)

Changes to indirect taxes in particular can have an effect on the pattern of demand for goods and services. For example, the rising value of duty on cigarettes and alcohol is designed to cause a substitution effect among consumers and thereby reduce the demand for what are perceived as “de-merit goods”. In contrast, a government financial subsidy to producers has the effect of reducing their costs of production, lowering the market price and encouraging an expansion of demand.

“In Canada, the federal excise tax on a carton of cigarettes is $17 (about 19-20 USD), according to background material released with the study.” (Kirkley) Sharon Kirkley, a senior medical reporter for Postmedia News, has studied the cigarette and tobacco related deaths in Canada and how the “sin tax” affects the death rate. A rise in the price of “sin taxes,” taxes on alcohol and tobacco, would help the price of American health care decrease.

This study will focus on examine the implications and impact of tobacco taxation increases on achieving the Smokefree 2025 goal in New Zealand. Firstly, I would review literatures about use of tobacco taxation around the world, the research methods and implications on smoking control. Secondly, I would carry out a survey about attitude and reaction of smokers and their families (potential smokers) for increasing tobacco taxation in New Zealand. Thirdly, in order to assess whether taxation will be an effective strategy associated to the future Smokefree goal, I would draw tables and diagrams to find the trend of percent of smoking prevalence from now to year 2025. Finally, we can form a conclusion about impact of tobacco taxation.

(ii) The government may impose excise taxes on goods so as to discourage their consumption or production. known as sumptuary taxes, e.g. taxes on the consumption of alcoholic drinks