Goberment Tabacco Taxation Policy

Goberment tabacco taxation policy

As we have been told since we were kids, tobacco or cigarrettes are addictive and very bad for your health and can evolve to serious diseases like, for example,lungs or skin cancer, and eventually even cause death. This is why when we talk about tobacco, we are facing a negative externality, because it has a negative influence and society and that’s why the goberment create laws that regulates the consumption of theses goods by adding a tax to the price and that way reducing the quantity demanded.The use of this kind of regulation on these kind of good of services benefits the goberment by providing a tax revenue that can be use to improve other aspect of society that may need financial help.

Like it was mentioned before, tobacco or cigarretes are addictive and that allow as to assume that is a good with a rather inelastic demand curve, which makes necessary for the goverment to create publicity campains and an increase on the price by adding taxes and this way increasing the social benefit.

It’s possible to think in the possibility of making tabacco illegal, this way nobody would be able to buy a pack of cigarrettes and nobody would get sick or die for smoking, but the truth is that this kind of regulation would create a black market, in which would not be possbile to predict the results. That’s why is better to slowly increase the prices and campains agains smoking and also reducing the smoking-allowed areas, so the change can be progressive, generating culture about why is not good to smoke and maybe even generating a social stigma against it.

We believe that these taxes are the correct way to proceed on this problem, because Chile have a high numbers of smokers and people start at an early age, so it’s good that the taxes keep increasing so people start realizing that smoking not only damage your body and health but also takes a great deal of your money.

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