Effect of excise tax increases on cigarette prices in South Africa

The effectiveness of excise tax as a tool for reducing tobacco consumption depends largely on how the tax increases impact retail prices. The study estimates this price relationship in South Africa (2001–2015). The magnitude of the price increase depends on the degree to which the tax increase is passed through to consumers. The degree of passthrough thus determines effectiveness. This paper considers the dynamics of cigarette excise tax passthrough in South Africa. People change their purchasing behavior in response to retail price changes, not in response to excise tax changes.Bill & Melinda Gates Foundation grant number 408254 (IRMA 20177