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Tobacco Tax Structure and Smuggling

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  • Sophia Delipalla

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.

Suggested Citation

  • Sophia Delipalla, 2009. "Tobacco Tax Structure and Smuggling," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(1), pages 93-104, March.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200903)65:1_93:ttsas_2.0.tx_2-2
    DOI: 10.1628/001522108X444161
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    References listed on IDEAS

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    Cited by:

    1. Laszlo Goerke & Frederik Herzberg & Thorsten Upmann, 2014. "Failure of ad valorem and specific tax equivalence under uncertainty," International Journal of Economic Theory, The International Society for Economic Theory, vol. 10(4), pages 387-402, December.
    2. Rainer Niemann & Mariana Sailer, 2023. "Is analytical tax research alive and kicking? Insights from 2000 until 2022," Journal of Business Economics, Springer, vol. 93(6), pages 1149-1212, August.

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    More about this item

    Keywords

    smuggling; specific taxes; ad valorem taxes; tobacco control; European tax policy;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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