Tax on cigarette and tobacco did not reduce the number of smokers

Health Economics

Increased in tax on cigarette and tobacco did not reduce the number of smokers. Why?

          There is data that shown cigarette and tobacco nearly killing six million peoples a year. More than five million of those deaths are the result of direct tobacco use, while, more than 600,000 of non-smokers being too exposed to second hand smoke. Based on this, government try to reduce the number of deaths due to smoking by increasing the tax on cigarette and tobacco. The increasing in tax on cigarette and tobacco did not reduce the number of smokers in Malaysia especially. As we know, every year, government increased the tax on cigarette and tobacco. But, still the number of smokers keeps increasing every year.

          The first reason that the increased in tax on cigarette and tobacco did not reduce the number of smokers is because people addicted to it. People who are addicted by cigarette and tobacco do not care much of the price of the cigarette and tobacco. Even though the price keeps increasing, they still were willing to buy it to fulfill their addiction. For the smokers or addicted people, cigarette and tobacco like a basic things in their life. This kind of people also does not care much about their health.

                                             

 

                                                                                                 

Secondly, we can say that cigarette and tobacco is inelastic demand. Even though the price keeps increasing, the demand still there or only reduces in small number. This is especially to habitual smokers. They willing to spent much of their income on buying a cigarette and tobacco. They cannot easily withdraw from this habit. The increasing in tax on cigarette and tobacco did not reduce the number of smokers. Those smokers only lessen their cigarette consumption. For the habitual smokers, they might find or looking for substitution to feed their addiction. For example, they will look for low prices cigarette. In Malaysia, there are some places that sold low price of cigarette and tobacco because they are not taxes.

                If the smokers found that the increase in the price of cigarette and tobacco too high due to the increase in tax, they will find substitution for it or they will buy the cheap cigarette and tobacco in the black market. The increasing in the price of cigarette and tobacco due to high tax rate gives the opportunity to smugglers to gain profit in their illegal business. They will bring the cigarette and tobacco illegally enters the country. There are many cases in Malaysia especially. The smugglers bring the cigarette and tobacco from neighboring countries. Based on the statistic, Malaysia was in the 3^rd place among the 11 countries in Asia (ITIC& Oxford Economics 2013) that mostly use illegal cigarette. This illegal cigarette and tobacco is cheap because it is not taxes. Because of the arising in smuggling activities especially on cigarette and tobacco goods, the number of smokers still did not reduce. People still can afford to buy the cigarette and tobacco with low price in the black market.

               Not the only that, the increased in tax on cigarette and tobacco did not reduce the number of smokers because smoking become a trend nowadays no matter what is their gender. As we know, the highly number of smokers is among youth. For them, smoking is a nowadays trend. They thought that smoking symbolizes the maturity. That is why the number of smokers among teenagers keeps increasing every year. Some people especially the smokers thought that smoking has a positive value to them. They think that smoking can release their tension and increase their performance in the workplace. This is also the reason why they keep buying the cigarette and tobacco even though the price is too high due to high tax.

              There is no awareness in term of health especially; makes the increased in tax seems not succeed in reducing the number of smokers. People or the smokers already set in their mind that smoking can reduce their tension and increase their performance in the workplace. So that, they do not care much on their health as long as they can release their tension. They think that smoking is the way of releasing their tension. They did not concern about their health. That is why the number of smokers did not reduce even though the price of cigarette and tobacco is high due to high taxes on it.

The unintended consequences

The unintended consequences of higher tax such as a problem of underground for gambling and the rampant smuggling of a tobacco and alcoholic drink. Other unintended consequences are the purchasing power of the people has decreases, the productivity of labor has decreases, the smuggling activity and the crime has increases.

Firstly, the unintended consequences are the purchasing power of the people has a decrease. This is because a hardcore user who smokes cigarettes will spend their income to a buy a cigarettes. If previously before the higher tax of cigarettes, the one consumer was affordable to buy consumer goods in a large quantities, but when the government impose higher tax of cigarettes, so their income that are received are not enough to buy consumer goods and their consumer are forced to limit their consumer goods. This is because hardcore smokers will remain stay or maintain to buy cigarettes even though the higher tax of cigarettes has increases.

Second is, the productivity of labor has decreases. This is because, when the hardcore smoker always to buy cigarettes, this will can cause happen the health problem in their self. For example, such as cough, ill will, heart diseases and other. When the health problem coming, so it can make their productivity their work decreases. This is because when the hardcore smoker has a health problem, they will always to have a sick leave. So, the quality of work also decreases and it will slow down the process of economic growth.

Another consequence is, there will have a smuggling activity. The smuggling activity happens from the effect of higher tax of cigarettes. The people who are not responsible will take an advantage from the effect of higher tax with do a smuggling activity of cigarettes. When the smuggling activity happens, the national income will be decreases. This is because the hardcore smoker will find the cigarettes that are cheaper price as another alternative with by purchasing through smuggling. The cost of health expenditure also increases. The government had to spend a lot of money with only to buy a medicine from another country to cure heavy smokers, such as medicine of cough, heart diseases and other else.

Lastly, the crime also increases. This is due to the increases higher tax of cigarettes. The hardcore smoker who are not affordable to buy a cigarettes their will use another alternative that are simple to get the cigarette with are stealing and robbery. This will cause the crime will be increases.

BUDGET 2014 IMPOSED HIGHER SIN TAXES.

Why increased in tax on cigarette and tobacco did not reduce the number of smokers.

          Malaysia government decided to impose high tax on cigarette and tobacco to increasing their revenue and also to reduce the number of smokers. As we know, there are not easily to reduce the number of smokers even the price of cigarette and tobacco are high. There are several factors that can prove the fact. 

Firstly, because the price of smuggling tobacco more cheaper than local cigarette and tobacco. In response to higher cigarette taxes, smokers will switch to cheaper brands or cheaper tobacco products. Usually smuggling cigarette and tobacco more cheaper than the local cigarette. This behavior, which is also known as "substitution", establishes a legitimate concern. certain portion of smokers will not be affected and some of them manage to maintain their levels of tobacco consumption through substitution. Thus, the smokers, especially for the lower and middle income will prefer to take the smuggling cigarette rather than quit from taking a cigarette. Thus there will be no reduction in overall tobacco consumption. 

 Secondly is addicted to tobacco and cigarette. For the hardcore smokers, their tobacco addiction is so strong, so, if the price of cigarette is raising it will not reduce the demand. They cannot stop easily because the had been smoke for long time. Besides that, no effort to quit, will be a factors why the higher tax and price of cigarette and tobacco cannot reduce the number of smokers.

Thirdly is less awareness among the smokers about the dangerous of the tobacco and cigarette. Most of the smokers knows that smoke can harm themselves and also people around them. In addition, many awareness campaign are implemented to help the smokers aware about the risk of smoke. However, the lack of awareness among them causing these symptoms could not be curbed. Even though, the price of cigarette and tobacco is raised, but they still want to smoke.

The unintended consequences of higher taxes such as problems of underground market for gambling and the rampant smuggling of tobacco and alcoholic drinks.

Because of the higher taxes, unintended consequences will come into society. The negative consequence is cause poverty and high crime. This could be happen because of more people does not afford to live on their income and will become poverty. It causes additional drain on the budgets of government social programs such as subsidy of education, infrastructures facility and others. Many poor people will not able to find jobs because government overtaxed the economy, so poor people will start turn to crime to get some money to buy a cigarettes, alcoholic drinks and at the same time they need to support their families. This causes crime rate to go up. Since many of crime are robberies, the violent crime rate goes up too.

Second are shoddy products everywhere in market. This is because, government levy so many taxes on business that taxes is the highest budget items on the ledger sheets of most businesses. These taxes take away money to improve quality. Instead, businesses must cut some of their budget to make the products and pay taxes. To save their money, they will produce shoddy products to the customers. 

The positive effect from higher taxes in tobacco, cigarette and alcoholic drinks is underage smokers will stop from cigarette problem in school. Diem money provided by their parents certainly not enough because to buy a pack of cigarettes or alcoholic drinks. So, if they are good daughter they will stop smoking and start focus on more benefit activity for their self and health.

Next is the problem of death due to smoking and drunk drivers may be reduced because it is increasingly difficult to be get when taxes is high. So, Malaysian society is not likely to continue rather than should stop smoking, stop gambling, and stop taking alcoholic drinks and it is a matter that should be proud as a Malaysian.