Cross Border Effect Analysis

The suppression of the non-medical usage of psychoactive goods through taxation has existed in both Western and non-Western societies since at least the 17th century. Despite their controversial nature and varying levels of successes, they have become a mainstay of modern Western society. David Courtwright, in his 2001 book Forces of Habit, underlines the fact that taxation and control do not occur merely by policies shaped by domestic concerns and stakeholders in isolation from the wider world – especially not in today’s globalised world with rapid communication and easy transportation. The so-called “cross-border effect” is one of these external forces that embodies the challenges that both national and regional governments face in the

To understand why this presents a significant challenge in the formulation of appropriate taxation policies, we must first understand the motivations that underlie the call for taxation and control. Courtwright outlines a few of the major contributing motivations - moral and religious objections, concerns over social costs and public health, and the need to raise government revenues. While moral and religious beliefs have historically played a role in the call for control of tobacco consumption, the rising public awareness of the links between cancer, smoking, and passive smoking and their associated social and healthcare costs is the more major modern motivations for regulation. There is, however, also the acknowledgement that the consumer’s demand tobacco products tend to be a bit “sticky”, that is, difficult to change within the short term, due to the addictive and habit-forming nature of the product. In many ways, then, governments came to see the increased taxation of tobacco an easy way to raise revenue in the short term, and as part of a longer-term consumption reduction strategy responding to the public’s call for

The efficacy of taxes on psychoactive goods and the extent of appearance of the cross-border effect are influenced by much more than prices and tax levels. Instead, a complex balancing act between the diverging goals of a government and society, affected by the unpredictable behaviors of the consumer and large social and geographical contexts, governs the outcomes of