ipl-logo

Tax On Cigarettes In Australia

749 Words3 Pages

Microeconomics IA – Cigarette taxation The article is about the increase of tax on cigarettes in Australia. Senator Leyonhjelm is interviewed and it can be seen that he is not happy about the excise hike. The article tells smokers to stop smoking and save themselves some extra money that they would normally put into their health insurance. Cigarettes are demerit goods which are goods or services that are considered bad, unhealthy and socially undesirable due to their negative externalities. Externalities can be either of production or consumption and positive or negative and it means that the action that is being taken affects a third party. In the case of this article regarding cigarettes, there are negative externalities of consumption as …show more content…

This is because cigarettes are addictive, at least in the short run and therefore are a demerit good. “A smoker’s dirty habit can really add up over the course of the year, and it’s just become even more expensive so now would be a great time to quit and potentially save yourself over $10,000 a year…”, this supports the claim that even though the process might get higher due to indirect taxation, the shift in demand will be fairly low due to the fact that people get addicted and money aspects cannot do much in the short run. With the 13% tax on cigarettes, the equilibrium price will shift upwards which mean that the consumer burden marred as orange in figure 1 is much larger than producer burden marked yellow in diagram …show more content…

However, due to the fact that cigarettes are a demerit good and negative externalities are present, the MPB is going to be greater than the MSB. This is because cigarettes have a negative effect on the society and third parties involved through means such as smoke. Looking at the fact that the MPB is higher than MSB we can see that consumers are more preoccupied with their own private benefit rather than the society. The free market equilibrium will shift to P1 and Q1. As the MPB is greater than the MSB there is going to be a welfare loss which is labeled as the purple triangle and in order to get rid of the deadweight, the Australian government imposed an indirect tax of 13% on cigarettes which would shift the MPC up. By doing this the government hopes to cancel out the welfare loss which can be seen as the blue triangle on the graph. If everything was to go perfectly with the taxation, the ideal situation would be that the quantity of cigarettes decreases and goes back to the quantity of the social optimum (A) and there would be a new equilibrium price at

Show More
Related
315 Words | 2 Pages

If cigarettes are offered at economic rates, users are able to save a considerable amount of money in the long run. For these reasons discount Canadian cigarettes are profitable to the manufacturer, as well as the consumer. Most discount Canadian cigarettes are bulk order purchases. The discount rates vary depending upon the size of the order. Retailers also make a considerable profit.

Read More
768 Words | 4 Pages

Taxes will also reduce producer revenue so that might face opposition as article mentions that in 2012 when government increased the tax by 1$ the tobacco interests spent 47.7 million dollars in opposition or unemployment will increase. As most of cigarets employers are manufacturing workers who have low skills which may not have skills to find another job. Government in need of votes and more likely would not give theirs votes to the government which increase price on cigarettes by putting tax on cigarettes. There is much less advantages then disadvantages. Most important advantage is that government will have higher revenue which they could invest into merit goods such as education or health.

Read More
1993 Words | 8 Pages

In California alone, the number count of deaths from smoking has been increasing every single day and has not been going down at all. In reading a article I read that a Surgeon General stated that “ Approximately half of today’s 44.8 million smokers will die prematurely from smoking-related diseases.” Prop 56 will help California put the death toll lower than it is right now. The way Prop 56 will help save many lives is by adding a $2.00 increase in the tax revenue for a cigarette or anything that contain the ingredient of nicotine. When reading a map in Tobaccofreekids.com I saw that California was the 37th out of the 50 states that had the lowest taxes on cigarettes.

Read More
891 Words | 4 Pages

It is said that “the tax hike would bring in an additional $326.7 million in annual revenue for a state that is operating under severe budget constraints”(Teague). If the tax on smoking goers up it can bring some of that money back in. The bad thing is that Americans are still losing more money from smoking than receiving. The Oklahoma City Bombing was a true tragedy. In the Bombing “ The dead would number 168, including 19 children”(Ripley).

Read More
712 Words | 3 Pages

Many Canadians still think that the government can do better and have campaigned relentlessly to make cigarettes illegal. Users of cigarettes have responded to these campaigns saying that cigarettes should still remain being legal as users have the right and freedom to do as they please. This reason is valid, but definitely not

Read More
1563 Words | 7 Pages

This is particularly true in the UK, Canada, and Australia, where such legislation has taken effect (Dennis). Those who support that model are certainly not wrong – without smoking, the majority of people would benefit in terms of their health and well being. But we do no ban things because they are unhealthy. We let the citizens decide, using their free will and their choices offered to them by the free market, as should be the case in any democratic

Read More
2177 Words | 9 Pages

Most people who smoke say they started young, so putting an age restriction, having a more smoke-free environment, and raising taxes on cigarettes will prevent young people from being able to get their hands on tobacco products or wanting to. With less tobacco use in the world, more people will be healthier and life expectancy will rise, not only because they will not be putting dangerous chemicals in their bodies, but the pollution caused by cigarettes will decrease. It would be nice to see less littered cities and states and have more clean air to breathe. Overall, the country and the world will be happier and healthier. This will improve the lives of the people, though not everyone will always comply, but according to data in previous paragraphs if we try and make an effort tobacco can eventually become a thing of the

Read More
673 Words | 3 Pages

Commentary: The state of California is Planning to add a $2 tax on tobacco in the upcoming months, in order to increase government revenue and decrease cigarette consumption amongst the Californian population. The smoking of tobacco and cigarettes has a negative externality of consumption. It is an econòmic activity which has negative effects and costs of a third party, the rest of society. The smoker can get diseases and will xreate expenses for the Health System, plus he may make other people get diseases if there is passive smokers around him.

Read More
1121 Words | 5 Pages

Within the year of 2010, consumers of cigarettes were faced with higher prices as a tax increase of 25 per cent was put into effect by the Australian federal government. These figures, along with the other effects of the tax increase, were published in The Age article, ‘Price rise pushes puffers to patches’. The article comments and provides evidence to positive societal outcomes that have resulted from the government’s tax hike, where it outlines the increase in demand of products used to help consumers say ‘no’ to cigarettes. As the article has mentioned an increase in demand of cigarette substitutes, it is evident that the tax increase on cigarettes would have, and continue to have an effect on the market outcome.

Read More
854 Words | 4 Pages

As the producers are not fixed to pay the cost of negative externalities of their products, so the public contribution increases their profit. As these products are profitable, so they produce more not considering the increasing worse affects of them on public health. In reality, these negative externalities, starts a cruel chain of increased sales, big profit and more diseases. High growth of production and sale of cigarette, alcoholic drinks and unhealthy foods like fast food, fizzy drinks and processed snacks of this century are the major examples of negative externalities. The total economic profit and loss of all participants involved, defined the overall cost and benefit to society, but this cost accounting that cover only producers and consumers do not include profit and loss received by third party due positive and negative externalities of these production / services.

Read More
1546 Words | 7 Pages

Furthermore, as Li, Robson, Ashbury, Hatcher and Bryant stated that smoking has been widely reported to be more prevalent in the lower socio-economic classes and among Canadian-born people as compared to Canadian immigrants (2009). Additionally, although tobacco is considered as an inferior good whose elasticity is low, smokers are becoming increasingly price-sensitive as there are more and more new cigarette products that have been introduced into the market, thus consumers may seek ways to purchase less expensive cigarettes, particularly as tobacco taxes increase the overall price of cigarettes.

Read More
1200 Words | 5 Pages

Externalities can be defined as whenever the benefit or cost of consuming a good affects people that are not actually consuming it. They come in two forms: positive and negative externalities. Positive externality can be defined as this occurs when the consumption or production of a good causes a benefit to a third party an example can be education when people go in college because they want to get an education, probably so they can get good jobs, live happy lives, etc. But them getting an education does not just benefit them, it benefits society as well. Some may go on to invent handy products, or come up with important ideas, which everyone else will gain from.

Read More
1276 Words | 6 Pages

Specific Purpose Statement: To invite my audience to consider the advantages and disadvantages of smoking cigarettes so that they can make an informed decision on whether or not to smoke them Thesis: There are two obvious stances on cigarettes: pro-cigarette and anti-cigarette. Today I would like to explore these two stances and have a discussion about your current views. Introduction:

Read More
1374 Words | 6 Pages

Internalizing Externalities: A Complex Approach This introductory section provides a brief overview of “internalizing externalities” worldview and its key characteristics. Every subject of economic activity affects environment surrounding it, which may include water, plants, soil, animals, people, other subjects and even weather and climate. The effects caused by economic activity are called “externalities” and they can be positive or negative. Regarding the environment, externalities are mostly negative: air and water pollution, extinction of species, weather and climate change.

Read More
1095 Words | 5 Pages

1.1 Background Indonesia is one of the developing countries that have high levels of consumption and production of cigarette. Variation product and price cigarettes cause Indonesia has become one of the producers and consumers cigarette the largest in the world (Anies, 2006). According to the Director of the Directorate General of Customs and Excise, Frans Rupang, permitting the establishment of a cigarette production is relatively easy. Now we have at least 3,800 cigarette factories, including home-based classes. The amount was the largest in the world (http://bisniskeuangan.kompas.com accessed 25 April 2015).

Read More

More about Tax On Cigarettes In Australia

Related Topics

Open Document