Impact of Cigarette Taxation

Microeconomic Analysis

Abstract

Main objective of the research: this work aims to contribute to the debates on the taxation of certain products considered harmful, a concept adopted by the Selective Tax, which would not be in the general rules of the Value Added Tax (VAT), and the beginning of the validity of Decree No. 12,127, of July 31, 2024, of the Presidency of the Republic, which greatly increases the price of cigarettes to the consumer.
Diagnosis of the problem and/or opportunity: referring to the provisions of Articles 3 and 5 of Directive No. 92/12/EEC of the Council of the European Communities, and Article 1 of Directive No. 2003/96/EC of the Council of the European Union, we propose a targeted taxation model, with a Tax List of products considered, collectively or individually, harmful.
Methodology: the work evaluates the effects of the increase in cigarette taxes through Microeconomic concepts.
Results/Application: the application of the concepts adopted in this work showed, among other factors, that, considering the classification of the Price Elasticity of Demand for Cigarettes in the “Relatively Inelastic” category 0 < ή < 1; the reduction in cigarette consumption through the application of a tax has a discreet impact on the reduction of smoking.
Contribution: the contribution of the evaluation of this work to the topic gains prominence considering the debates for the taxation of certain products considered harmful, the Selective Tax, which would not be in the general rules of the Value Added Tax (VAT), and the beginning of the validity of Decree No. 12,127, of July 31, 2024, of the Presidency of the Republic, which greatly increases the price of cigarettes to the consumer.