Question

Part (d)Is a tax on cigarettes a regressive tax or a progressive tax? Explain your answer, including a definition of both terms

.Part (e)Australia’s police forces and border forces have warned that rapid rises in the tax on cigarettes have had unintended consequences of encouraging illegal activity such as smuggling, with proceeds funding other criminal activities. Explain why this might be the case. In your answer refer to the role that elasticity of demand plays in making illegal activity more profitable.

Answer 1

Part (D) Tax on cigarettes is a Progressive or Regressive ?

Regressive Tax:

Low-income individuals pay a higher amount of their incomes in taxes compared to high-income earners under a regressive tax system because the government assesses tax as a percentage of the value of the asset that a taxpayer purchases or owns. This type of tax has no correlation with an individual's earnings or income level.

Regressive taxes include property taxes, sales taxes on goods, and excise taxes on consumables, such as gasoline or airfare. Excise taxes are fixed and they're included in the price of the product or service.

Progressive Taxes:

Taxes assessed under a progressive system are based on the taxable amount of an individual's income.

Tax rate, along with tax liability, increases as an individual's wealth increases.

So the Tax imposed on Cigarettes is an excise tax because the Consumable product on Excise is considered as Excise tax which comes under Regressive Tax. Thus the tax on Cigarettes is Regressive not progressive.

If the tax rate for cigarette increases the consumers wants also increases according to the mindset of the comsumer. If he had a control over consuming cigarettes per day we don't able to say he only consume one cigarette per day so the mind changes.

Part (e):

In most developed countries, businesses use a broad variety of marketing techniques to increase their sales, gain market share, attract new users, and retain existing customers.

So in the technique of increasing the sales is done by Designing or Promotional activities of particular product.

Most of the Youngsters gets addicted to the cigarettes as well as consuming liquor later on they invloved in smuggling process so that they have been get caught by police and in imprisonment after some talks police come to know that 50% of the Youngsters have consuming and get addicted and involved in Smuggling activites. So if the demanded goods increases in market the price increases and the sales also increases so that we may say that Price- elasticity demand occurs. The quantity demanded when there is change quantity demanded by change in price.

Thus we can say that when there is change in Quantity demanded and change in price demand for the product increases so that the price increases and the seller gets more profit in the name of elasticity. Smuggling activites or criminal activities happening now a days also but it is not the right way to get income. To avoid these type of crime we need to break the chain of youngsters or Consumers in order to change their habit by conducting awareness program.