Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia

Djutaharta, Triasih ; Viriya Surya, Henry ; Pasay, N. Haidy A. ; Hendratno ; Adioetomo, Sri Moertiningsih

World Bank, Washington, DC

关键词: ADOLESCENTS;    ADULTS;    ADVERTISING;    AGED;    AGGREGATE ANALYSIS;   

RP-ID  :  31706

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This study uses aggregate times seriesdata (annual data from 1970-2001) and monthly data fromJanuary 1996 to June 2001 to estimate the price and incomeelasticity of demand for tobacco products in Indonesia.Using various model specifications used in the cigarettedemand literature, and then selecting the best model, itestimates the real price elasticity of cigarette demand as-0.345 and income elasticity of demand as 0.473. Thisinplies that a 10 percent real price increase would reduceconsumption by 3.4 percent, and a 10 percent real incomeincrease would raise consumption by 4.7 percent. Theeconomic crisis after 1997 was found to increaseconsumption, over and above the effects of price and income,and the warning label on cigarette packs required after 1991appears to have no significant impact on demand. Estimatesbased on the shorter period of monthly data showed lessresponsiveness to price and incomes, as would be expected.The study simulates the effects of a tax increase on totaltobacco excise revenues and predicts that an increase in thetax level of 10, 50, or 100 percent would increase total taxrevenue by 9 percent, 43 percent, and 82 percentrespectively. The study comments on the effect of possibleswitching to cheaper products or illegal purchases.