Exploiting a low tax system: non-tax-induced cigarette price increases in Taiwan 2011-2016

Mattia Sanna, Wayne Gao, J. Robert Branston, Hung-Yi Chiou, Yi-Hua Chen, Allison Wu, Chi-Pang Wen

Research output: Contribution to journalArticle

3 Citations (Scopus)
44 Downloads (Pure)

Abstract

Introduction: This study aims to analyse the non-tax-induced price increasing strategies adopted by tobacco industry in Taiwan, a high-income country with comprehensive tobacco control policies but low tobacco taxes and a declining cigarette market. Methods: Using governmental tax, price and inflation data, we analysed cigarette sales volume, affordability, affordability elasticity of demand, market share, pricing and net revenue of the top five tobacco companies in Taiwan from 2011 to 2016 when no tax increases occurred. Results: Total revenue after tax grew significantly for all the major transnational tobacco companies between 2011 and 2016 at the expense of the state-owned Taiwan Tobacco and Liquor Corporation. In terms of market share, Japan Tobacco (JT) was the leading company, despite experiencing a small decline, while British American Tobacco and Imperial Brands remained stable, and Philip Morris International increased from 4.7% to 7.0%. JT adopted the most effective pricing strategy by increasing the real price of its two most popular brands (Mevius and Mi-Ne) and, at the same time, doubling the sales of its cheaper and less popular brand Winston by leaving its nominal retail price unaltered. Conclusions: Low and unchanged tobacco taxes enable tobacco companies to use aggressive pricing and segmentation strategies to increase the real price of cigarettes without making them less affordable while simultaneously maintaining customers' loyalty. It is crucial to continue monitoring the industry's pricing strategies and to regularly increase taxes to promote public health and to prevent tobacco industry from profiting at the expense of government revenues.

Original languageEnglish
Pages (from-to)1-7
Number of pages7
JournalTobacco Control
Early online date4 Jun 2019
DOIs
Publication statusE-pub ahead of print - 4 Jun 2019

Keywords

  • Tobacco
  • tobacco tax and price
  • Taiwan
  • Tobacco control
  • price
  • taxation
  • tobacco industry

ASJC Scopus subject areas

  • Health(social science)
  • Public Health, Environmental and Occupational Health

Cite this

Exploiting a low tax system: non-tax-induced cigarette price increases in Taiwan 2011-2016. / Sanna, Mattia; Gao, Wayne; Branston, J. Robert; Chiou, Hung-Yi; Chen, Yi-Hua; Wu, Allison ; Wen, Chi-Pang.

In: Tobacco Control, 04.06.2019, p. 1-7.

Research output: Contribution to journalArticle

Sanna, Mattia ; Gao, Wayne ; Branston, J. Robert ; Chiou, Hung-Yi ; Chen, Yi-Hua ; Wu, Allison ; Wen, Chi-Pang. / Exploiting a low tax system: non-tax-induced cigarette price increases in Taiwan 2011-2016. In: Tobacco Control. 2019 ; pp. 1-7.
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