Cigarette Tax Hike Sparks Panic Buying

Topics: Supply and demand, Price elasticity of demand, Tobacco Pages: 4 (1352 words) Published: August 14, 2013
Section 1
In the article ‘Cigarette tax hike sparks panic buying’, Hall (2010) discusses the effects of tax increase on cigarettes. The government has decided to raise the tax on cigarettes by 25%, costing $2.16 more on a pack of 30 cigarettes. This government intervention is an attempt to stop people from smoking and reduce the health bill caused by those who smoke. The increase in tax is expected to save $5 billion more of the people’s tax dollars and the government decided that it will be put into a better use for its health and hospitals reparations. This contractionary fiscal policy is expected to reduce the total tobacco consumption by approximately six percent and drive down the number of smokers by 87,000. The tax increase has directly affected the tobacco industry and its consumers as well as the government. These primary stakeholders are the ones that will be impacted the most with the newly introduced government fiscal policy. However, there are more stakeholders to consider, generally all those who supplies and demands cigarettes. These stakeholders include the suppliers and the community on which the business acquires its resources. The massive decline in the consumption of cigarettes will undoubtedly affect the primary stakeholders, companies in the tobacco industry and smokers. Tobacco industry will lose a proportion of their consumers and the smokers will pay more for a pack of cigarettes as the article mentioned Quit Victoria revealed that the price increase would roughly cause 100,000 people to quit smoking and 25,000 children to not taking up the habit (Hall, 2010). As the body that imposes the tax, the government will naturally be affected in this circumstance. The tax increase of 25% on cigarettes will increase government revenue. The tax hike is expected to raise $5 billion over four years and it will be diverted into its health and hospital refurbishments (Hall, 2010), which will also benefit non-smokers given that their tax dollar will...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Cigarette Tax in America Essay
  • Tax on Cigarettes Essay
  • Cigarette Tax Essay
  • Effects of an Increase in the Cigarette Tax Essay
  • Essay on Cigarette Tax in the Philippines
  • The Impact of Sin Tax on the Consumer’s Demand for Cigarettes Essay
  • Tax Avoidance and Tax Evasion Essay
  • Cigarettes Essay

Become a StudyMode Member

Sign Up - It's Free