50% increase in the price of cigarettes to reduce demand: PIDE – Pakistan
ISLAMABAD: A 50 percent increase in the price of cigarettes would result in the same amount of reduction in demand for tobacco in Pakistan, as the majority of smokers would prefer to quit instead of switching to other brands.
This was revealed in a research study titled âChange, Reduce or Quit: How Smokers Respond to Tobacco Tax Hikes in Pakistanâ recently conducted by the Pakistan Institute for Development Economics (PIDE) .
The PIDE study found that an increase in prices would help reduce cigarette consumption, adding that the higher the prices, the greater the reduction.
It shows that only 9% of cigarette users would choose to switch, while the rest would choose to either quit or reduce their smoking. Of the nine percent who would change, about 15 percent of users intend to switch to tobacco-free products. Therefore, the rate of change between brands and other tobacco products is only 7%.
The results of the study also invalidate the illicit trade argument put forward by the tobacco industry.
Findings that the affordability of cigarettes makes it easier to smoke and that smokers do not turn to other brands or products – as well as the fact that cigarette prices are significantly lower than smokers’ willingness to pay – make a convincing case for effective tobacco tax policies, according to the study.
Excise taxes on tobacco as a proportion of price are well below the minimum of 70 percent suggested by the World Health Organization. Taxes should be increased at least up to this threshold to have a significant impact on reducing cigarette consumption in Pakistan.
The relationship between successive price increases and intentions to quit smoking is explored. In the survey, smokers were given various price increase scenarios (20 percent, 30 percent, 40 percent and 50 percent) of their favorite product and asked if they would continue to use it. in the event of such a price increase.
Those who said they would not give up on a 20 percent price increase were then asked the same question with a 30 percent price increase and so on. The results show that the higher the percentage increase in the price, the lower the number of people who would continue to smoke.
Smokers’ stated preferences for different price increases lead to an inverse relationship between price and demand for cigarettes, he said.
There is plenty of room for significant increases in tobacco taxes, he said, adding that the average maximum willingness to pay (MWTP) of Rs 35.80 per stick translates to Rs 716 (4.5 $ US) for a pack of 20 cigarettes.
Market research shows that the prices of even the biggest brands in Pakistan are almost three times lower than the MWTP of cigarette consumers. This demonstrates how low the price of cigarettes is in Pakistan, the study added.
Copyright recorder, 2021