Impacts on Tax Rate of Cigarette toward Economic Welfare of Thailand: Simultaneous Equation Analysis

  • Sakkarin NONTHAPOT Indo-China Country International Trade and Economic Research Sector, Faculty of Integrated Social Sciences, Khon Kaen University, Nong Khai Campus, Thailand
  • Tanawat WATCHALAANUN Indo-China Country International Trade and Economic Research Sector, Faculty of Integrated Social Sciences, Khon Kaen University, Nong Khai Campus, Thailand

Abstract

This study aims to (1) know the influence factor on demand and supply cigarette  market of Thailand (2) estimate the economic welfare that affecting from the cigarette  excise tax rate and (3) evaluate the worthiness of cigarette tax policy which compare with  the cost related to the treatment of smoking patients. This research used the time series   data from 1984 to 2016 included 33 years. The influence factors on demand and supply are analyzed by using simultaneous equation, estimated by three stage least square (3SLS) method and economic welfare computation. Then, it calculates economic welfare and the cost related to the treatment of smoking patients. The results are found that that cigarette price has a negative relation on cigarette demand while the consumer price index has positive relation on demand. On the other hand, the prices have a positive relation on cigarette supply while the selling cost and exchange rate have a negative relation on supply. Moreover, cigarette tax and Gross Domestic Product have a positive relation on the cigarette price. The simulation forecasting results are shown that the rising of cigarette tax rate increases the tax revenue; however it decreases economic welfare that has an effect on producer’s surplus more than consumer’s surplus. From the results, the tax policy is still worth on the economic welfare.

References

[1] Gujarati, D. N. 2009. Basic Econometrics (5th ed.). New York, NY: McGraw-Hill.
[2] Huang, B-N. Yang, C-W. and Hwang, M.J. 2004. New Evidence on Demand for Cigarette: A Panel Data Approach. International Journal of Applied Economics, 1(1): 81-97.
[3] Koutsoyiannis, A. 1977. Theory of Econometrics (2nd ed.). London: Macmillan Press.
[4] Leartsakulpanitch, J., Nganthavee, W. and Salole, E. 2007. The Economic Burden of Smoking-Related Disease in Thailand: A Prevalence-Based Analysis. Journal of the medical association of Thailand, 90(9): 1925-1929.
[5] Nation TV. 2017. Smokers suffered! 12 items of Thai cigarettes increase their prices. Retrieved from http://www.nationtv.tv/main/content/economy-business/378545802/.
[6] Nonthapot, S. and Lean, H. H. 2015. International tourism market analysis in the Greater Mekong Sub-Region: A panel data approach. Pertanika Journal of Social Sciences and Humanities. 23 (4), 945-966.
[8] Obih, U., Emenyonu , C.A., Onyemauwa, S.C. and Odii, M.A.C.A. 2008. Welfare Effects of Shifting from Tariff to Ban on Rice Import Policies in Nigeria. The Social Sciences, 3: 309-321.
[9] Pathumanont, C. et al. 2001. Expenses and quality of life lost from being sick of the diseases caused by smoking. Chiang Mai: Faculty of Medicine, Chiang Mai University.
[10] Pindyck, R., and Rubinfeld, D. 1998. Econometric models and economic forecasts (4th ed.). Singapore: lrwin McGraw-Hill.
[11] Rangsit, S., Bailowas, P. and Sitthiphongphanich, T. 2010. Cost of smoking: Literature reviews. Academic Journal of Public Health, 22(1): 1-23. [In Thai].
[12] Suranovic, S. M., Goldfarb, R. S., and Leonard, T. C. 1999. An economic theory of cigarette addiction. Journal of Health Economics. 8(1), 1–29. https://doi.org/10.1016/S0167-6296(98)00037-X
[13] The Bureau of Tobacco Control. 2016. Situations on the surveillance for controlling the consumption of tobacco of Thailand B.E.2559. Bangkok: Ministry of Public Health.
[14] Thianthong, A. 2000. Public finance. Khon Kean: Phra Thammakhan Publishing. [In Thai].
[15] Tobacco Factory. 2015. Annual report of 2015. Tobacco Factory, Ministry of Finance. Thailand tobacco monopoly. Retrieve from: http://www.thaitobacco.or.th/th/2015/08/00236.html.
[16] Yeh, C.-Y., Schafferer, C., Lee, J.-M., Ho, L.-M., & Hsieh, C.-J. 2017. The effects of a rise in cigarette price on cigarette consumption, tobacco taxation revenues, and of smoking-related deaths in 28 EU countries-applying threshold regression modelling. BMC Public Health, 17(1), 676. https://doi.org/10.1186/s12889-017-4685-x
[17] Zheng, Y., Zhu, J., & Li, D. 2008. Analyzing Spatial Panel Data of Cigarette Demand: A Bayesian Hierarchical Modeling Approach. Journal of Data Science. 6, 467–489.
Published
2019-10-31
How to Cite
NONTHAPOT, Sakkarin; WATCHALAANUN, Tanawat. Impacts on Tax Rate of Cigarette toward Economic Welfare of Thailand: Simultaneous Equation Analysis. Journal of Advanced Research in Law and Economics, [S.l.], v. 9, n. 6, p. 2079-2088, oct. 2019. ISSN 2068-696X. Available at: <https://journals.aserspublishing.eu/jarle/article/view/3974>. Date accessed: 15 oct. 2024. doi: https://doi.org/10.14505//jarle.v9.6(36).23.