Hiking cigarette taxes will only strengthen illicit trade
There will be serious unintended consequences if policymakers don’t first break up illegal networks
After the declaration of a national disaster in March last year the government imposed temporary, but controversial, bans on tobacco and (recurrently) alcohol sales as part of its response to the pandemic.
These were intended to curtail the consumption of tobacco and alcohol. However, it is not clear that the sales ban has been in any way successful. It has starved the Treasury of much-needed tax revenues. In 2020, government revenues fell by more than 10% and the fiscal deficit more than doubled. With substantial revenues usually coming from the so-called sin taxes, the sales ban has proved a costly decision...
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