How might imposing higher excise duty on tobacco products affect public health and government revenue?
Parliament has approved a Bill to levy higher excise duty on tobacco. I want to know how this move could influence tobacco consumption, public health outcomes, and state finances.
Imposing higher excise duty on tobacco products is a fiscal and public health measure often used by governments to discourage tobacco consumption and increase revenue. This approach has both direct and indirect effects on society.
- Reduction in Tobacco Consumption: Higher excise duties increase the price of tobacco products, making them less affordable, especially for price-sensitive groups like youth and lower-income populations. This can lead to reduced consumption and prevent initiation among new users.
- Improvement in Public Health: Lower tobacco usage results in fewer cases of tobacco-related diseases such as cancer, heart disease, and respiratory illnesses. This can decrease the burden on the healthcare system and improve overall public health outcomes.
- Increase in Government Revenue: Initially, higher excise duties can lead to increased revenue for the government as existing users continue to buy tobacco products at higher prices. This additional revenue can be allocated to health programs or other welfare schemes.
- Long-term Revenue Trends: Over time, as consumption decreases significantly, the growth in revenue may slow down. However, the reduction in healthcare costs due to lower disease burden can balance this effect.
- Discouragement of Illicit Trade: There is a risk that excessive tax hikes may encourage smuggling or illicit trade in tobacco products. Effective enforcement and monitoring are necessary to address this challenge.
Answered
42 minutes ago