Economic Evaluation Of The Impact Of Raising Tobacco Tax On Tobacco Consumption

Objective:This study aimed to understand the mechanism and actual impact of China’s tobacco tax adjustment on cigarette consumption through empirical analysis of cigarette consumption data over the years.This paper analyzed the changes of cigarette consumption in China after the promotion of tobacco tax in 2015.Through the establishment of econometric model,we could re-estimate the consumption elasticity of China’s cigarette under the background of tobacco control,further understand the characteristics of China’s cigarette consumption and provide reference suggestions for China’s future adjustment of tobacco tax policies and provide China’s experience for the international community.Contents:Refer to the websites of State Tobacco Monopoly Administration,Monopoly Taxation Administration and relevant research documents to understand the transmission process and mechanism of China’s tobacco consumption tax.Summarize the research progress of domestic and foreign tobacco tax,understand the influencing factors and analysis models of China’s cigarette consumption,in order to provide the basis for further analysis.Describe the relevant indicators of China’s cigarette consumption since the improvement of tobacco tax.Understand the characteristics of cigarette consumption in China.Establish a model of cigarette consumption demand.Analyze the actual effect of tobacco tax on cigarette consumption,and re-estimate the consumption elasticity of cigarette in China under the background of tobacco control.Methods:This study summarized the research progress of tobacco tax and the influencing factors of cigarette consumption through literature study.This study analyzed the data at the national level through descriptive statistical method,and observed the changes of cigarette consumption related indicators.Using econometric analysis method to establish cigarette consumption demand model,the study analyzed the cigarette consumption panel data of each province in 2006-2016,and re-estimate the demand elasticity of cigarette in China under the background of tobacco control.Results:1.The transmission mechanism of tobacco tax to cigarette retail price in China.China’s tobacco industry implements a tobacco monopoly system of unified leadership,vertical management and monopoly.The prices of links in cigarette circulation,from production,wholesale to retail,are uniformly set by the State Tobacco Monopoly Administration according to the market supply and demand,with little market flexibility.China’s cigarette consumption tax is subject to the internal price tax,which is levied in the production and wholesale links,but not in the retail links.Industrial enterprises and tobacco companies are the taxpayers of cigarette consumption tax.Therefore,under the tobacco monopoly system,the promotion of cigarette consumption tax may not necessarily be transmitted to consumers.2.The influence of raising tobacco tax on cigarette consumption at the national level.By analyzing the consumption of cigarettes in China before and after the tax adjustment in 2015,it is found that in 2015,the retail price of cigarettes in China increased by 6.7%,the average price increased by 9.4%,and the per capita sales volume decreased by 8.9%.The decrease in sales volume mainly came from low and medium price cigarettes.Cigarette sales in each quarter of China fluctuated periodically,and there may be gift consumption.After tax in 2015,the overall sales volume in each quarter shifted downward,but the fluctuation trend still exists.In addition,China’s cigarette consumption structure is rising,and the high price cigarette market has a strong ability to recover from price changes.3.Determine the included variables of cigarette demand model.This study comprehensively reviewed the relevant literature on the empirical research of cigarette demand at home and abroad,and sorted out the variables included in the model in the similar research.Based on the literature research,combined with the research objectives of this study,a candidate index set is finally formed.According to the candidate index set and index selection principle,combined with the model fitting situation,the demand model included variables are determined,and finally two explanatory variables and five explanatory variables are determined.4.Quantitative analysis of cigarette demand in each province.Based on the consumption data of 2006-2016 from each province,the study established an econometric analysis model of cigarette consumption demand and a model of consumption structure.The results of cigarette consumption demand model show that the price elasticity of cigarette is-1.039,the income elasticity is 0.606,the price of cigarette and the policy of banning smoking in places have a negative effect on cigarette consumption,the income and the lowest cigarette price in neighboring provinces have a positive effect on cigarette consumption,and the demand of cigarette has a downward trend over time.The results of regression model of cigarette consumption structure show that the price of cigarettes and the policy of banning smoking in places have a negative effect on cigarette consumption structure,and the income has a positive effect on cigarette consumption structure.Discussions1.The change of cigarette consumption in China after tax is comprehensively described.After the increase of China’s cigarette consumption tax in 2015,China’s cigarette retail price increased by 6.7%,and the per capita cigarette sales decreased by 8.9%.The decrease of sales volume mainly came from the third,fourth and fifth categories of low and medium price cigarettes,while the influence on the first and second categories of medium and high price cigarettes was relatively small.After raising tobacco tax,the daily cigarette consumption of residents decreased,but there was still gift consumption.In addition,China’s cigarette consumption structure continues to rise,and the sales volume of high-priced rolls recovers relatively quickly2.The demand elasticity of cigarettes in China is re-estimated under the background of tobacco control.For the first time,this study included the non-smoking intensity variable,and calculated the price elasticity of demand for cigarettes in China which is-1.039,and the income elasticity of demand is 0.606 under the background of tobacco control.At the same time,the lowest cigarette price has a positive effect on cigarette consumption,and the intensity of smoking ban in public places has a negative effect on cigarette consumption.In addition,China’s cigarette consumption demand has a downward trend over time.3.The paper clarified the increase of cigarette price in China after tax.Due to different calculation methods,different scholars have different opinions on the issue of the length of cigarette price after raising tobacco tax in 2015.In this study,the retail price and average price of cigarettes were both used for calculation.The results show that after tax,the retail price of cigarettes in China has increased by 6.7%,which indicates that the increase of tobacco tax is transmitted to the retail price.The average price of cigarettes increased by 9.4%,indicating that the consumption structure of cigarettes in China has been improved and consumers tend to buy cigarettes with higher prices.4.The consumption structure index of cigarette was established innovatively in this study.The ratio of the average price of cigarettes to the retail price was used to measure the change of the consumption structure of cigarettes in China.The quantitative analysis showed that the retail price of cigarettes and the measures of banning smoking in public places have a negative effect on the consumption structure,and the per capita disposable income has a positive effect on the consumption structure of cigarettes.5.In China’s monopoly system,the promotion of cigarette consumption tax is not necessarily transmitted to the price.Tax price linkage is the premise of tobacco tax to play a role in tobacco control.6.Tax control of tobacco has some limitations.There are some phenomena such as gift consumption and price consumption in the cigarette market of our country,which show that the residents don’t fully understand the harmfulness of cigarette.Tobacco tax decreases cigarette consumption by means of price,which makes it difficult to change consumption culture and habits from the cognitive level in a short period of time.Suggestions:The research on tobacco tax in China is not enough.In the future,we can continue to enrich and improve the empirical study on tobacco tax in China through more detailed observation on the segmented population,cigarette consumption behavior,smoking cessation behavior and so on.China’s cigarette consumption tax is only levied in production and wholesale,which is not conducive to tobacco control.In the future,the gorvernment can explore the taxation in the retail sector and the implementation of extra price tax,continue to promote the reform of tobacco consumption tax system,and give full play to the important role of tobacco tax in tobacco control.China’s tobacco tax has room for growth.In the short term,a large tax increase will squeeze the profits of the tobacco industry from the sales volume and price,which is not conducive to economic development and social stability.In the future,we can explore the periodic increase of cigarette consumption tax,and implement the linkage of tax and price,while reducing cigarette consumption,to strive for time for the transformation of the tobacco industry,and gradually achieve the long-term goal of tobacco control.In addition,the cigarette consumption tax system as a means of tobacco control has its own limitations.China’s tobacco control work needs to rely on multiple means,strengthen the implementation,gradually guide the public to cultivate good health habits,and further consolidate and improve the effect of tobacco control.