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Institutional Affiliation: World Health Organization
NBER Working Papers and Publications
|August 2010||Cigarette Excise Taxation: The Impact of Tax Structure on Prices, Revenues, and Cigarette Smoking|
with Frank J. Chaloupka, IV, Richard Peck, John A. Tauras, Xin Xu: w16287
The main purpose of this study is to provide empirical evidence on the effects of the cigarette excise tax structure on three outcomes: cigarette prices, government revenues, and cigarette consumption. We composed cross-sectional time-series data for 21 EU countries from year 1998 to 2007 from various data resources. We provide strong evidence that the price gap between premium and low-priced brands is larger in countries with a greater share of ad valorem tax. A 10-percent raise in the share of ad valorem tax in total excise tax leads to about a 4 to 5 percent increase in the price gap, with a smaller impact in more concentrated markets. Our estimates confirm that greater instability of government tax revenues from cigarette excise taxes can be attributed to greater reliance on the ad v...