13.0 Introduction

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13.0 Introduction

13.1 Price elasticity of demand for tobacco products

13.2 Tobacco taxes in Australia

13.3 The price of tobacco products in Australia

13.4 The affordability of tobacco products

13.5 Impact of price increases on tobacco consumption in Australia

13.6 Revenue from tobacco taxes in Australia

13.7 Evasion of taxes on tobacco products

13.8 Tobacco industry arguments against tax increases

13.9 Smuggling a result of tax increases?

13.10 A regressive tax?

13.11 A threat to government revenue?

13.12 Future directions for reform of tobacco taxes

13.13 Hypothecation

13.14 Public opinion about tobacco tax increases

Acknowledgments

References

Attachment 13.1 Legislation relevant to tobacco taxation mentioned in this chapter: Commonwealth

Attachment 13.2 Legislation mentioned in this chapter: States and territories

Pricing of cigarettes and other tobacco products is one of the most effective ways that tobacco companies can both maintain consumer demand and protect returns to shareholders. Because taxes make up a substantial percentage of the price and because consumers are moderately (but not dramatically) responsive to price changes, increasing the rate of tax applicable to tobacco products allows governments to both reduce population consumption of tobacco and increase government revenue.

This chapter summarises research on the price elasticity of demand for cigarettes. It provides data on recent and historical levels of tax on tobacco products and the resulting changes in the price and affordability of cigarettes and other tobacco products in Australia. It documents the consequent changes in the amounts of revenue received by government from duties, fees and taxes on tobacco products. It explains several important and emerging policy issues relevant to tobacco taxation. Finally it describes public attitudes to tobacco taxes and the uses of the revenue they generate.