Elasticity of tobacco products in...
17
Elasticity of tobacco products in Croatia Accelerating Progress on Effective Tax Policies in Low-and-Middle –Income Countries
Transcript of Elasticity of tobacco products in...
Elasticity of tobacco
products in Croatia
Accelerating Progress
on Effective Tax Policies in
Low-and-Middle –Income
Countries
Supply of tobacco products
Croatian tobacco market (2017)
Total value of tobacco export and import (EUR), 2010-2016
• reduction of tobacco production (surfaces under tobacco and tobacco yields)
• since 2013 intensive harmonization of excise duties with European excise system
0.3% GDP
Imports of cigarettes in Croatia by country of origin (percentage shares, %) 2010-2016
• Major tobacco importers: Philip Morris International, Japan Tobacco International, Imperial Tobacco Group and British American Tobacco
Exports of cigarettes in Croatia by country of destination (percentage shares, %) 2010-2016
• Major tobacco exporter: Tvornica duhana Rovinj
Demand for tobacco products
20%
22%
24%
26%
28%
30%
32%
34%
36%
38%
40%
42%
male total female
37.0%
in 2013 absolute number of smokers decreased under 1 million
27.7%
Smoking prevalence
Youth tobacco use
13-15 years age group • 47.2% have used tobacco products at least once • 15.9% currently use tobacco products • 56.9% were not prevented from buying cigarettes at the store
because of their age, despite the legal obligation
9
students who turn 16 in the calendar year of the survey • 32% have tried cigarettes at the age of 13 or younger • 33% have used cigarettes during the last 30 days • 23% are daily smokers • 73% state that cigarettes are easy or very easy to obtain
The increase in the price of tobacco products should make tobacco products less affordable and less accessible for young people!
Consumption and price of cigarettes in Croatia
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
400,000.00
450,000.00
500,000.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
The
aver
age
wei
ghte
d p
rice
of
ciga
rett
e p
ack
(d
efla
ted
by
the
glo
bal
CP
I, EU
R)
Qu
anti
ty o
f ci
gare
ttes
so
ld
(in
00
0 p
acks
of
20
cig
aret
tes)
)
Cigarette consumption Price of cigarette
10
• cigarettes are the main tobacco product used in Croatia
• rising trends in value of cigarette sales with descending trends in volume of sales at the same time
• increase in value of retail sale of fine-cut smoking tobacco in recent years
Volume and value of tobacco products sold in 2002-2016 period
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
number of cigarettes solds (pcs in 000)
value of retail sales - tobacco products (000 EUR)
value of retail sales - cigarettes (000 EUR)
Elasticity of tobacco products
FINDING: In Croatia, cigarette demand is price sensitive!
13
Aggregate time-series analysis
• increase in price by 10% would lead to a reduction in long-term quantity demanded for cigarettes by 6.1%
5.4 EUR
the retail price of the best-selling cigarette brand 3.6 EUR
the annual cigarette consumption 1,737 cigarettes/adult
1,212 cigarettes
fiscal revenues + 129.1 million EUR
(ED 118.8 million EUR + VAT 10.3 million EUR)
14
Aggregate time-series analysis
+50%
15
Limitations:
- Number of observations
- Multicollinearity problem
- Issue of illegal cigarettes sales
• increase in price by 10% would lead to a reduction in quantity demanded for cigarettes by 10.7%
• increase of 10% of the income would raise cigarette consumption by 9.1%
3.51 EUR
the weighted average retail price of the cigarette 3.19 EUR
AND
gross domestic product (GDP) 2.8%
the annual cigarette consumption -25.5 million packs (-5.44%)
fiscal tax revenues +26.6 million EUR (+3.42%) (ED 24.5 million EUR + VAT 2.1 million EUR)
16
+10% ED
HBS data analysis
17
Limitations:
- price elasticity is estimated only for cigarettes and not for other tobacco products
- this study uses data on household level, while it would be more relevant to use individual level data
- our data time-frame was limited to only three years (2010, 2011 and 2014)
