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    MIcroeconomics Case Study Cigarette

    Uploaded by

    Amit Sharma
    The document discusses taxation in India's tobacco sector. It notes that while cigarettes make up only 12% of tobacco consumption, they account for 87% of excise revenue. This rapid shrinking of the tax base in tobacco is creating inequality. The document proposes formalizing tobacco taxation policy to increase the tax base by reducing cigarette taxes and increasing taxes on informal sectors like bidis to reduce evasion and black market activity. Formalizing policy would lead to increased government revenue while keeping the tax burden equitable across tobacco products.

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    MIcroeconomics Case Study Cigarette

    Uploaded by

    Amit Sharma
    56 views5 pages
    The document discusses taxation in India's tobacco sector. It notes that while cigarettes make up only 12% of tobacco consumption, they account for 87% of excise revenue. This rapid shrinking of the tax base in tobacco is creating inequality. The document proposes formalizing tobacco taxation policy to increase the tax base by reducing cigarette taxes and increasing taxes on informal sectors like bidis to reduce evasion and black market activity. Formalizing policy would lead to increased government revenue while keeping the tax burden equitable across tobacco products.

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    MIcroeconomics case study cigarette

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    MIcroeconomics case study cigarette

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    The document discusses taxation in India's tobacco sector. It notes that while cigarettes make up only 12% of tobacco consumption, they account for 87% of excise revenue. This rapid shrinking of the tax base in tobacco is creating inequality. The document proposes formalizing tobacco taxation policy to increase the tax base by reducing cigarette taxes and increasing taxes on informal sectors like bidis to reduce evasion and black market activity. Formalizing policy would lead to increased government revenue while keeping the tax burden equitable across tobacco products.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    56 views5 pages

    MIcroeconomics Case Study Cigarette

    Uploaded by

    Amit Sharma
    The document discusses taxation in India's tobacco sector. It notes that while cigarettes make up only 12% of tobacco consumption, they account for 87% of excise revenue. This rapid shrinking of the tax base in tobacco is creating inequality. The document proposes formalizing tobacco taxation policy to increase the tax base by reducing cigarette taxes and increasing taxes on informal sectors like bidis to reduce evasion and black market activity. Formalizing policy would lead to increased government revenue while keeping the tax burden equitable across tobacco products.

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    Are Cigarettes overtaxed

    in India?
    Prepared By – Aakash, Aditya, Amit, Ankit Jain and
    Ankit Rathore.
    Problem Identification
    Situation Analysis

    Volume of tobacco consumption is


    significantly decreasing. The reason
    behind the same is currently just 12
    percent of tobacco consumers are
    cigarette smokers and they are
    paying 87 percent of the excise
    revenue. Rest comes from the
    informal sector which amounts to just Cigarettes as a Percentage in Tobacco
    Year Excise from Tobacco Volume % Excise %
    13 percent. This has led to rapid 1971-72 277.5 23 70
    shrinking of tobacco tax base in the 1981-82 834.8 21 82
    1993-94 3140 16 87
    tobacco sector.
    Problem Statement

    1. The policy of revenue generation through taxation on


    tobacco products is not formalised. It is creating inequality
    of tax incidence which is way higher when compared to the
    income inequality in the country.

    2. Because of excessive taxation on formal sector, viz.,


    cigarettes, informal sector viz., bidis consumption is
    increasing and taxation on the same is not easy.

    3. The focus of government is more on Taxation on


    cigarette rather than increasing tax base in tobacco sector.
    Possible Solutions
    1. Proper policy has to be framed for taxation in the tobacco
    sector.

    2. Bidis and non – smoking products have to be regularized in


    terms of taxation, production and uniformity should be maintained
    in terms of size of the products.

    3. Excise on cigarettes has to be reduced and simultaneously has


    to be increased on informal sector so that the tax evasion from
    formal sector (Black market) could be avoided. This will
    automatically lead to increase in tax base of formal tobacco sector.
    Conclusion
    1. Formalisation of policy in tobacco sector will lead
    to increase in government revenue while keeping the
    tax base in check. Also this will not lead to
    excessive tax burden on any particular product.

    2. Formalisation of policy will also avoid black


    marketing of excessive tax products of tobacco
    sector as will prevent the migration of consumers
    from formal to informal sector.

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