DEMAND AND SUPPLY ANALYSIS OF THE EFFECTS OF AN INCREASE IN EXCISE DUTY ON CIGARETTES IN BUDGET 2009

1.INTRODUCTION In Budget 2009 tabled last Friday, chance on traffic on cig bettes was gaind by three sen from 15 sen per juncture to 18 sen per stick to encourage healthy lifestyles and curb smoking-related mixer problems, in particular among youngsters and students. This effectively raised the duty for a 20-stick pack of cigarettes by 60 sen, similar to the quantum of join on compel last year. This topic will explore the effects of the increase in excise duty on cigarettes to consumers involve and producers supply using basic economic theory. 2.DISCUSSION There are 3 jumbo players in the baccy industry in Malaysia, i.e.: i.British America Tobacco (M) Bhd ii.JT International Bhd iii.Philip Morris (M) Sdn Bhd The Malaysian baccy industry is valued at roughly $1.44 billion, of which mosh earns the lions dowery approximately $1 billion. The domestic market consumes about 70 per cent of output. The rest is exported to Vietnam, Hong Kong, China, Brunei and the duty-free market. Together, the three big players organize a monopolistic competition in the manufacturing and distributing tobacco products.

The sensitive taxation structure on tobacco from 1 family line 2008 is as follows: (RM/kg)CurrentNew Excise duty (Domestic cigarettes)150180 spay (%)20% Ad valorem tax (on production cost)20%20% Import duty (Imported cigarettes)200200 gross revenue tax (on ex-factory gross revenue value)5%5% Source: MOF The tax increase was near univers eithery expected by the investment connection as it achieves two purposes for the government, i.e. raise revenues and push home its anti-smoking meaning by raising the bar! of affordability, particularly among the younger generation. Therefore, the disturbance among the industry players was really the quantum, rather than whether duties would be raised. The 20% increase equal to 3 sen per stick was exactly the same measurement as the surprise excise duty hike on 5 July last year Tax was wide-eyedy passed on to consumers, and more. As all tobacco...If you want to get a full essay, order it on our website: BestEssayCheap.com

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