Article 2
Taxes
According to the article I have read, it is stated that the government should increase the price of cigarettes from RM10 where it is the current price to RM30 for a pack of cigarettes. Besides, it is known that this is one of an effective way to lower the consumption of cigarettes. In Malaysia, the price of cigarettes is known to be cheaper than many other countries that have anti-smoking measures. The price of a pack of cigarettes in Malaysia is considered low compared to countries such as Singapore and the United States. In year 2008, a study has been made and it was found that if taxes were to produce an increase in the price of cigarettes, the number of adult smokers in America would decrease. One of the reasons of imposing tax is to reduce the use of cigarettes in order to reduce health problems. It has shown effectiveness of the increase in the price of cigarettes that has reduced the consumption of cigarettes.
From the article, we can see the importance of price elasticity of demand for determining the significance of tax on cigarettes. When tax is imposed, the price elasticity of demand will show the decrease in demand of cigarettes. Besides, it is known that the price elasticity of demand for cigarettes is inelastic which means that imposing tax that will increase the price will decrease the demand by a lower percentage. Furthermore, the price elasticity of demand is important for determining the tax and the impact caused to the economy. However, imposing taxes may have certain positive and negative influences on the economy. These influences may include smuggling, less health problems, and might cause a problem for the poor and young cigarette consumers. Since the price elasticity of demand for cigarettes is inelastic, it will cause an impact to the poor. If the taxes keep rising, this will result in the poor having a need to spend a higher amount of their income of purchasing cigarettes. Other than that, the price elasticity of demand will also decide the decrease in demand for cigarettes. A higher decrease in demand will lead to reduced tax revenue. The taxes include tax and value added on a product, profit taxes and income taxes that are imposed on employees. Therefore, the decline in demand that was caused by the increase of tax will lead to the government receiving less tax revenue. Furthermore, elasticity will also determine the employment rate in the economy. For example, when the tax has caused a decline in demand of cigarettes, the profits of the firms will most likely drop due to the quantity of cigarettes bought will be less. Therefore, firms will usually dismiss workers as the demand for cigarettes has decreased due to the tax imposed that has reduced their profit. And finally, it will link to workers producing too much tobacco and lead to a loss when there is less demand. This will result in unemployment of workers in the tobacco firms. However, if tobacco consumers reduce their consumption of cigarettes or quit smoking and spend their income on other goods, then the taxes might lead to better employment rate in other parts in the economy. Aims for reducing the demand of cigarettes will be determined by using price elasticity value. It will determine the proper tax value that will increase the prices of cigarettes to the level where consumption is reduced.
From the discussion, we can see that the government is trying to increase the tax so that there will be less consumption of cigarettes. But at the same time, it has positive and negative effects to the economy. Raising taxes will bring many benefits to the society because consumers would not be able to spend most of their money on cigarettes and therefore, they would either lower the consumption or quit smoking. In addition, there would be less diseases and health problems related to smoking and less irritation to exposure. Although the tax of cigarettes may increase, that does not mean that every person’s demand for it may decrease. This may have a great impact on the poor since they will have to spend more income on cigarettes. The only situation that will change is their quantity they demand and not the demand itself. Besides, if the taxes imposed by the government are too high, it may cause smuggling activities and black market cigarettes will have a better profit. Therefore, the government should enforce the law by catching smugglers and sending them to jail. Besides, people who buy illegal cigarettes should be fined or jailed because they are buying illegal goods that do not have a tax. Other than that, even if taxes are raised, smokers will just switch to the cheapest substitution brand they could find and thus there will be still no reduction in the consumption of cigarettes. Another factor is that tobacco control will only lead to rural economy facing poverty to highly depend on farming tobacco. The measures to reduce the demand of tobacco may be a success, but the reduction of supply is not very effective. This is because even if one of the suppliers fails to supply the goods, another supplier will have the opportunity to come into the market. The addiction for cigarettes of consumers nowadays is so strong that raising taxes would not affect much on the demand. In my opinion, the government should come up with a strategy to create awareness for youngsters and non-smokers of the consumption of tobacco. Examples of strategies should include providing the education in schools to prevent smoking at early age and raising penalties for people who smoke underage or smoking at prohibited areas. The list of aims should include stopping youngsters from smoking, preventing influence of smoking to non-smokers, and provide health information to current smokers. After a discussion of a list of positive and negative effects, the government should increase the tax of cigarettes. Although some consumers may not be affected by it, but it could make a difference to the economy. Besides, the government should publish the results of health effects on tobacco and ban smoking advertisements. Most importantly, public education is one of the most important ways to prevent smoking. The reason youngsters smoke is mostly because of parents who smoke. This will link to their children smoking and influencing other friends. Therefore, youngsters should be given education to cherish their health instead of forcing them to quit as for smokers.
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