Should Restriction and Tariffs on Tobacco Products Be Tightened - Essay Example

Name Course Tutor 29th February, 2012 Topic: Should Restriction and Tariffs on Tobacco products be tightened? Introduction Tobacco products have known to be harmful. This is because of the diseases associates with the consumption of such products. The diseases which include lung, mouth, throat and gullet cancer, heart and chronic diseases reduce the life expectancy of human as well as require a lot finance to fund the health care of such patients. The diseases do not only affect the smokers but also passive smokers, pregnant women and children (Barber et al, 2008). This has brought the need for each nation to regulate tobacco products through tariffs and legislations. Body The government of each nation has various responsibilities that it is liable to perform. These duties need finances which all together are referred to as public revenue. The government therefore has a number of ways that it uses to collect revenue such taxation among licenses, fines and penalties. All are important with taxation being the most important resource of government since in most cases it contributes more than fifty percent of the public revenue. Consequently, the government has to account for the revenue based on its duties which include maintenance of security and federal administration, provide infrastructure, basic and social services together with participation in production and marketing of commercial goods (Shaffer et al, 2005). On the other hand, the government has purposes for tax with revenue generation being the main idea. Inherent to that, taxation which includes tariffs i.e. custom duty and excise duty is used to support economic stability, protect local industries through tariffs on imports among others. For many countries, tariffs are used as fiscal policies for both revenue generation and also for the public welfare. The revenue generated is among other activities used to provide health facilities and other social amenities (Barber et al, 2008). Tobacco products have been in many countries associated with high tariffs. Despite the fact that it has been a source of revenue, the government has aimed to provide a protective policy for the public out of the tariffs. Consumption of tobacco products results to costly health complications such as lung cancer among other smoking related diseases. For this reason, the government has imposed high tariffs on tobacco products which consequently are reflected on the hiked prices of tobacco products which are meant to discourage consumption of such commodities (Scollo & Winstanley, 2008). However, smokers have always bargained for the tariffs reduction or abolishment. This is because the tariffs increase the prices to unbearable points. Smokers argue to be high contributories of the public revenue and increasing tariffs sounds an insult (McNeil, 1998). On the other hand they recognize that government health care services are funded from the public revenue. For this reason, smokers should not bargain on tariffs abolishment as they burden non- smokers when a lot of funds are used to finance smoking associated health care costs. Tobacco companies most countries are known to report high profits therefore high income tax. Concurrently, tobacco companies have always bargained for abolishment of restrictions in regard to advertisements. For example, according to Cohen H 2005, tobacco products advertisements are restricted and regulated by the Federal Cigarette Labeling and Advertising Act. Like in most countries, the Act requires that warning statements to be exhibited on tobacco products packaging. In addition, the statute restricts any form of media advertisements of the products. According to McNeil 1998, a bill raised by the South African Health minister against smoking in public, advertisement and nicotine level regulation faced a lot of opposition from a tobacco interests, media and advertisement executives and free-speech. The opposition parties refused to endorse the bill on the grounds of unconstitutional speech limit, intruding on privacy and granting the minister large powers in regard to tobacco regulation. Generally, the bases of the oppositions are merely excuses while others are based on income generation from tobacco products. Inherent of Shaffer et al 2005, tobacco tariffs may be abolished to create effective trade especially bilateral trade mostly with a developed country that has greater economic and political power. Tariffs on tobacco create a basis for discrimination and challenged as a restrictive trade barrier. In general, tariffs and strict regulations on tobacco products would affect trade agreements especially for developing countries. According to the Aspect Consortium 2004, a justification for excise duties exists in the sense that unlike other goods, tobacco imposes social costs. In addition, the European Union commission advocates for further restrictions on the rationale that not all individuals account for the adverse effects of tobacco consumption in regard to their health and nicotine dependency costs. In regard to taxation, the Aspect Consortium advocates for higher taxation as tobacco products has some advantages as a tax base since it is easy to administer and to justify. In regard to Rijo et al 2010 recommendations in India, tightening policies regulating ‘bidi’ production which is a tobacco product would be of greater contribution in regard to tobacco control. Increasing of cigarette taxes to Rs 3691 per 1000 sticks would increase tax revenues by over Rs 146 billion and prevent 3.4 million deaths in current and future cigarette smokers. According to Barber et al 2008, Tobacco Economics Indonesia, tightening of tobacco regulations would enhance the protective measure since analysis proved that over 97 million non-smokers who are routinely exposed to passive smoking. In regard to increased tariffs, the analysis proved that it is globally evident that young people and low income earners are responsive to tobacco prices increase which is as a result of increased tariffs. Over 70 percent of the smokers in Indonesia started smoking at an average age of 19. Smokers would argue that increasing tariffs would reduce public revenue due to decreased production but Barber et al 2008 points out that increasing tobacco taxes is the most efficient way rather than promoting higher tobacco consumption. According to Scollo & Winstanley 2008, tobacco products in Australia like many other states are not perfectly price elastic as compared to other products. This means that an increase in the price of tobacco products will slightly decrease the demand. On the other hand, the effect of increase in tobacco products prices which is caused by increased tariffs is globally enormous. Conclusion Tightening the regulations and tariffs on tobacco products is generally of advantage to a particular nation (Barber et al, 2008). This is because banned advertisements and increased tariffs will result to public health promotion and concurrently reducing poverty, protecting children and at large can be viewed as a source of increased revenue. In the long run, tobacco smoking is inversely proportional to economy contribution. The demerits associated with smoking outweigh the revenue generated from increased smoking therefore the need for tightening regulations and tariffs on tobacco products. Works Cited Barber S, Adioetomo SM, Ahsan A & Setyonaluri D. Tobacco Economics in Indonesia. Paris. International Union Against Tuberculosis and Lung disease. 2008. http://www.tobaccofreeunion.org/assets/Technical%20Resources/Economic%20Reports/Tobacco%20Economics%20in%20Indonesia%20-%20EN.pdf Cohen H. Federal Advertising Law: An Overview. United States. CRS Report for Congress. 2005. Retrieved from http://ipmall.info/hosted_resources/crs/RL32177_051005.pdf. Retrieved on 29th February, 2012. McNeil D. The New York Times: South Africa Curbs Smoking and Tobacco Advertising. The New York Times. 1998. Retrieved from http://www.nytimes.com/1998/11/19/world/south-africa-sharply-curbs-smoking-and-tobacco-advertising.html?src=pm. Retrieved on 29th February 2012. Rijo. JM, Rao. RM, Rao. MG, Moore J, Deshpande RS, Sengupta J, Selvaraj S, Chaloupka FJ & Jha P. The Economics of Tobacco and Tobacco Taxation in India. Paris. International Union Against Tuberculosis and Lung Disease. 2010. http://www.tobaccofreeunion.org/assets/India_Tobacco_Economics_full_en.pdf Scollo, MM & Winstanley, MH. Tobacco in Australia: Facts and Issues. Melbourne. Cancer Council Victoria. 2008. http://www.tobaccoinaustralia.org.au/downloads/chapters/Ch13_Taxation.pdf Shaffer ER, Brenner JE & Houston TP. Tobacco Control: International trade agreements; a threat to tobacco control policy. London. BMJ Group. 2005. http://tobaccocontrol.bmj.com/content/14/suppl_2/ii19.full The Aspect Consortium. Tobacco or Health in the European Union: Past, Present and Future. Belgium. European Commission. 2004. http://ec.europa.eu/health/ph_determinants/life_style/Tobacco/Documents/tobacco_fr_en.pdf Read More