Tobacco Tax Structure and Smuggling

Sophia Delipalla

FinanzArchiv: Public Finance Analysis, 2009, vol. 65, issue 1, 93-104

Abstract: In a noncompetitive environment, a tax increase leads to a higher fraction of sales smuggled under pure ad valorem taxation, but the effect is ambiguous under a purely specific tax. Under a mixed tax regime, a tax rise increases the fraction of sales smuggled when the balance of the two types of taxes leans towards the ad valorem component. In any case, shifting the balance towards the predominant tax component reduces smuggling. The results are of direct relevance to global tobacco control policies and, in particular, to the smoking intervention and tax harmonization policies in the European Union.

Keywords: smuggling; specific taxes; ad valorem taxes; tobacco control; European tax policy (search for similar items in EconPapers)
JEL-codes: H22 H26 H32 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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DOI: 10.1628/001522108X444161

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