2005年-世界发展银行全球_Cigarette_Consumption_Taxation_and_Household_Income___Indonesia_Case_Study_60页_1mb

Summary of "Cigarette Consumption, Taxation, and Household Income: Indonesia Case Study"

Core Content

This study investigates the relationship between cigarette consumption, taxation, and household income in Indonesia, focusing on the economic impact of tobacco control policies. It uses data from the 1999 National Socio-Economic Survey (Susenas) to analyze how changes in cigarette prices and taxes affect smoking behavior and government revenues.

Main Findings

• Smoking Prevalence:

  • 57% of all households in Indonesia had at least one smoker.
  • Most households smoked kretek cigarettes (64%) or unfiltered kreteks (31%).
  • Only 14% smoked white cigarettes (conventional tobacco cigarettes).
  • Average monthly cigarette consumption per household was 18 packs (288 cigarettes).
  • Per capita consumption was higher in higher-income households: 7.83 packs per month vs. 4 packs in low-income households.
  • Households spent an average of 6.22% of their total income on cigarettes, with lower-income households spending the highest percentage.

• Price Elasticity:

  • A 10% increase in price reduces total cigarette consumption by 6%.
  • The effect is more pronounced among low-income households (nearly 7% reduction) and less so among high-income households (about 3% reduction).
  • Price elasticity of smoking participation is estimated, showing that price significantly influences the quantity of smoking, but not the decision to smoke.

• Income Elasticity:

  • A 10% increase in household income increases cigarette consumption by 6.5%.
  • The effect is particularly strong in low-income households (9% increase) and minimal in high-income households (less than 1% increase).
  • This indicates that income is a strong driver of cigarette consumption, especially for lower-income groups.

• Taxation Impact:

  • A 10% tax increase raises cigarette prices by 4.9%, leading to a 3% reduction in consumption and a 6.7% increase in tax revenues.
  • A 50% tax increase would raise tobacco tax revenues by 27.5%, assuming no significant substitution between cigarette types.
  • The share of household expenditure on cigarettes would slightly increase from 4.55% to 4.63% due to reduced consumption and increased tax rates.

Key Policies and Context

• Tobacco Control in Indonesia:

  • Smoking contributes to a high burden of disease, including 90% of mouth, throat, trachea, bronchia, and lung cancers, 75% of chronic obstructive pulmonary disease (COPD), and 40% of cerebrovascular diseases.
  • The Ministry of Health estimated that 6.4 million Indonesians were seriously ill due to smoking in 1995.
  • Anti-smoking campaigns have been minimal and ineffective, with limited public health impact.

• Taxation and Pricing:

  • Indonesia has a complex tobacco tax system with minimum retail prices as the basis for ad valorem excise taxes.
  • Machine-made cigarettes are taxed at higher rates than hand-made ones.
  • Ad valorem tax rates varied between 2% and 36% in 2000.
  • The average tax share of retail price was 29% in 1999, 37% in 2000, and 33% in 2001.

• Government Revenue and Public Health Conflict:

  • There is a potential conflict between public health goals and government revenue from tobacco.
  • However, studies show that increasing excise taxes leads to increased government revenues over time, as the decline in consumption is proportionally smaller than the tax increase.

Methodology Overview

• Two-Part Demand Model:

  • The model is used to estimate price elasticity of smoking participation, conditional price elasticity of demand, and total price elasticity.
  • It assumes households first decide whether to smoke, and then, if they do, how much to consume.
  • The model accounts for non-normal distribution of cigarette consumption and uses logarithmic transformations for more accurate estimates.

• Data Sources:

  • Data from the 1999 Susenas survey, including demographic characteristics, education levels, household income, and cigarette consumption.
  • The analysis includes 60,602 households with smoker households as the main focus.

• Price Estimation:

  • Prices are estimated using household expenditures and cigarette consumption data.
  • Unit values are calculated as the price per pack of cigarettes, based on the quantity consumed and total expenditure.
  • Nonsmoker households are assigned prices based on the assumption that they face similar cigarette prices to smokers with similar characteristics.

Policy Implications

• Taxation as a Tool:

  • Higher cigarette excise taxes are an effective policy to reduce consumption and increase government revenues.
  • The economic benefits of taxation outweigh concerns about smuggling and revenue loss.
  • Governments should focus on deterrence, detection, and punishment of smuggling rather than avoiding tax increases.

• Public Health Importance:

  • The prevalence and intensity of smoking in Indonesia are increasing, especially among youth.
  • Smoking is becoming younger in Indonesia, with some starting before 15 years of age.
  • Comprehensive tobacco control policies are essential, including advertising bans, public smoking restrictions, and health education.

• Need for Country-Specific Analysis:

  • The study highlights the importance of country-specific economic analysis for effective tobacco control policy.
  • Indonesia’s unique demographic and economic conditions require tailored approaches to reduce smoking rates and associated health burdens.

Conclusion

The study concludes that taxation is a powerful tool for reducing cigarette consumption and increasing government revenues, especially for low-income households. It also emphasizes the need for comprehensive tobacco control measures to address the rising health burden caused by smoking in Indonesia. The findings support the implementation of higher taxes as part of a broader strategy to reduce tobacco use and improve public health outcomes.