Please enable JavaScript.
Coggle requires JavaScript to display documents.
Article: Tax law - Coggle Diagram
Article: Tax law
Analysis
-
-
-
Tobacco has many negative externalities (160,100 deaths every year) therefore, the social cost is greater than the private cost; if the social cost is greater than the present price,
Evaluation
Positives
Reduce consumption
Reduce premature mortality from these diseases, mainly caused by tobacco
Heart disease, stroke, cancer, diabetes and chronic lung disease (responsible for almost 68% of all deaths in Pakistan)
-
Taxes on negative externalities are intended to make consumers/producers pay the full social cost of the good. This reduces consumption and creates a more socially efficient outcome.
Taxes raise revenue for the government. This can be spent on alternatives such as providing low cost healthy drinks to increase the consumption or in advertising to raise awareness.
Negatives
Taxes will cause inequality. A tax on cigarettes takes a higher percentage of income from those on low-income.
Increasing tax will lead to a fall in demand, although this may only be a small effect because demand is price inelastic. People are addicted and there are no close substitutes.
-
Improvements
-
-
Smokers already pay the social cost of smoking given the high level of current tax. Therefore the best argument for increasing taxes is the normative judgement that smoking is bad for people and the government should intervene to reduce demand.
Published: December 25, 2020
Title: Health ministry pushes for tobacco, soda tax law
-