Economic policies for tobacco control in developing countries

Raising tobacco taxes can have an income distributional impacton the population. Since lower socio-economic groupsusually smoke more, they also contribute more to total cigarettetax collection. Thus, those who can afford it least contributethe most in terms of tobacco taxes. This means thattobacco taxes are regressive. However, tobacco tax increasesare likely to be progressive, decreasing the relative taxincidence on the poor, vis-à-vis the rich. This is based on thepremise that the poor are likely to be more sensitive to pricechanges, and would thus reduce their cigarette consumptionby a greater percentage than the rich in response to an excisetax-induced increase in cigarette prices. Recent empiricalstudies confirm this hypothesis by demonstrating that theprice responsiveness of cigarette demand increases with income.Research in China confirmed that reducing cigaretteexpenditures could release household resources for spendingon food, housing, and other goods that improve livingstandards. Therefore, in the long run, tobacco control measureswill reduce social inequality.