Using a Natural Experiment to Examine Tobacco Tax Regressivity

Adel Bosch and Steven Koch

No 201424, Working Papers from University of Pretoria, Department of Economics

Abstract: We take advantage of a tobacco tax hike that occurred during the collection of the South African Income and Expenditure Survey to examine the regressivity of tobacco taxes. We are also able to examine the relative change in regressivity following the tax increase. Like previous research into commodity taxes, we find that tobacco taxes are regressive. However, we find that tobacco tax increases reduce the tax burden at the lower end of the income distribution, such that after the cigarette tax increase, cigarette taxes are less regressive than before the increase.

Pages: 24 pages
Date: 2014-05
New Economics Papers: this item is included in nep-afr, nep-pbe and nep-pub
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