Impact of excise tax on price, consumption and revenue

Increase in tobacco tax that leads to price increase is expected to reduce tobacco consumption and improve public health. This section reviews existing empirical evidence on the effects of excise tax on price, consumption, government revenue and public health. Tobacco taxes account for a fraction of tobacco product prices and the percentage reduction in tobacco use resulting from a price increase is smaller than the percentage increase in price in most countries. As a result, tobacco tax increases will increase tax revenues over the short to medium term.

 

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