Impact of cigarette taxation policy on excise revenues and cigarette consumption in Uzbekistan
Keywords:
Uzbekistan, tobacco, excise, cigarettes, revenueAbstract
BACKGROUND: In 2012,Uzbekistanratified the Framework Convention on Tobacco Control, which states that price and tax measures are an effective means of reducing tobacco consumption. We aimed to explore the effect of taxation policies on revenues and cigarette consumption.
METHODS: Data on tax rates, revenues, cigarette sales were taken from national reports. To forecast potential revenues, a scenario analysis was performed.
RESULTS: In 1991-2004, ad valorem excise system was in place in Uzbekistan, which was later replaced by the specific excise system. In 1997-2011, the nominal average excise has increased by a factor of twenty, but in real terms, after a sharp increase in 1999, average excise declined annually and increased only in 2010-2011. Annual cigarette sales per capita of adult population in 1999-2007 constituted 17-25 cigarette packs, while in 2008-2011 it increased to 30-37 packs. Four scenarios of excise tax increases in 2012 were developed: one actual scenario based on the rates effective in Uzbekistan in 2012, and three hypothetical ones anticipating excise rates increase by 1.5, 2 and 3-fold. With actual excise increase in 2012, the inflation-adjusted budget revenues would grow by 5%, and with three hypothetical - by 17%, 35% and 66% respectively, despite the decline of tax-paid cigarette sales.
CONCLUSION: Stabilization or reduction in cigarette excises in Uzbekistan in 2002-2008 led to a decline in real excise revenues and the growth of cigarette sales. In 1999 and 2010-2011, excises were significantly increased and the real revenues have risen, despite the decline in cigarette sales. As cigarette prices are low, the illegal outflow of cigarettes from Uzbekistan apparently exceeds the illegal inflow. A significant increase in cigarette excise (1.5-3 fold) can both increase budget revenues and reduce cigarette consumption, with greater increase yielding more benefits.
KEYWORDS: Uzbekistan; tobacco; excise; cigarettes; revenue.
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