CIGARETTE TAX BURDEN OF THAI SMOKER

Abstract

This paper uses data from Thailand’s cigarette smoking and alcoholic drinking behavior survey in 2007 to analyze the impact of the changing cigarette taxation on smoker incidence distribution. The analysis is carried out in the context of “rational addiction” and “time inconsistency” model. Given the hypothesis that the smoker is rational addicted, the cigarette tax is regressive. However, the contrary result occurs when we consider the problem from a time inconsistent model. The result reveals that cigarette taxes are much less regressive than previously estimated. Moreover, for some parameter values, the cigarette taxes are progressive, since lower income smokers are much more price elastic and therefore benefit more from the commitment device provided by higher taxes.