Aging, Health Economics, and Tobacco Taxation in Spain: Laffer Curve Insights for Fiscal and Health Policy

Juan Manuel Martín-Álvarez (), Alejandro Almeida (), Aida Galiano (), Antonio Golpe () and José Carlos Vides ()
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Juan Manuel Martín-Álvarez: Universidad Internacional de La Rioja
Alejandro Almeida: University of Extremaura
Aida Galiano: Universidad Internacional de La Rioja
Antonio Golpe: University of Huelva
José Carlos Vides: University of Seville

A chapter in Demographic Transitions, Health, and Well-Being, 2025, pp 17-27 from Springer

Abstract: Abstract This paper examines the role of tobacco taxation in Spain, focusing on its effectiveness in reducing smoking, generating fiscal revenue, and promoting health equity within the framework of health economics and the Laffer Curve. By reviewing international studies and employing panel data econometrics across Spain’s 48 provinces, we analyze the optimal tax rates that maximize revenue without excessively diminishing demand. Key findings highlight that while tobacco taxes are generally effective in reducing consumption, tax disparities between products and price elasticity variations—particularly due to substitution towards roll-your-own (RYO) tobacco—limit this impact. Demographic variables, including the aging population and socio-economic status, also influence consumption and tax sensitivity. Results suggest that Spain’s current tax rates may fall short of the revenue-maximizing point, indicating potential fiscal losses. This study advocates for a balanced approach to tobacco taxation, integrating both specific and ad valorem taxes and adjusting them to inflation, while harmonizing tax rates across products. These reforms could enhance Spain’s public health outcomes and fiscal sustainability, offering insights for optimizing tobacco tax policy in an aging population.

Keywords: Tobacco taxation; Laffer curve; Health economics and aging (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-94487-1_2

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DOI: 10.1007/978-3-031-94487-1_2

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