Impact of tax and price reforms on companies' price decisions in the complex cigarette tax system of Indonesia
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Campaign for Tobacco Free Kids, Washington, United States
Institute for Economics and Social Research Faculty, University of Indonesia, Depok, Indonesia
Publication date: 2021-12-10
Tob. Prev. Cessation 2021;7(Supplement):19
This study evaluates how changes in various aspects of excise tax systems, including minimum prices, differential price tiers across characteristics and products influence firms' pricing decisions. We apply our model to Indonesia, where the excise tax system is particularly complex for tobacco. We obtain a large database of prices over the past decade for all tobacco products currently sold in Indonesia, directly obtained from official government courses. We find that pricing decisions are significantly affected by taxes, but this result hides important or similar contribution of other pricing policies that are typically ignored in research that essentially focus on the tax impacts. Minimum price policies, and implied tax burdens gaps between products type can have a larger impact than taxes on tobacco pricing. The results imply that a multi-tiered, multi-products tobacco tax system likely generates important distortions that likely limit the objective of the government.
No Conflicts of Interest were reported.
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