The Demand for Cigarettes in Tanzania and Implications for Tobacco Taxation Policy
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Date
2015
Journal Title
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Abstract
The study attempts to estimate the demand for
cigarettes in Tanzania and presents simulation results on the
effect of the cigarette excise tax on smoking participation,
government revenue, and related topics. After briefly
summarizing the magnitude and spread of cigarette
consumption in the country, the paper reviews some
empirical estimates from African and other countries. The
2008 Tanzanian household budget survey was used to
estimate the demand for cigarettes in Tanzania. The
descriptive statistics suggest that the smoking prevalence for
Tanzania is 15.35 percent with low variability across
expenditure (income) groups. Smoking intensity and per
capita consumption were estimated at 7.08 cigarettes and
1.33 cigarettes, respectively, a relatively low value. A
two-part demand equation model was used to estimate
various elasticities. For the overall equation, the price
elasticities of smoking participation, smoking intensity, and
total elasticity were estimated at -0.879, -0.853, and -1.732,
respectively. Compared to similar results in other developing
countries, the estimates appear quite high. When estimated
by expenditure (income) groups, the magnitude of the
elasticity appears higher among high expenditure groups
than among low expenditure groups. Two simulation
exercises were undertaken. First, the effect of different
excise rates on smoking participation rate, cigarette
consumption, tax revenue, and related responses was
estimated and highlighted. Second, the same exercise was
undertaken to determine the effect of a given increase in the
cigarette excise tax on various expenditure groups. The
overall results suggest that an increase in the excise tax on
cigarettes in Tanzania would reduce cigarette consumption
and increase government tax revenue.
Description
Keywords
Tanzania, Cigarette Demand, Elasticity, Simulation
Citation
Kidane, A., Mduma, J., Naho, A., Ngeh, E.T. and Hu, T.W., 2015. The Demand for Cigarettes in Tanzania and Implications for Tobacco Taxation Policy. Advances in Economics and Business, 3(10), pp.428-435.