6. The inflation argument

25 Jun 2013

In countries where inflation is a major concern, the tobacco industry argues that tobacco tax increases are inflationary.38  This can be an effective argument if wages, pensions or other benefits are indexed to the consumer price index (CPI)  that is, if they are increased automatically in line with CPI.

Response:

  • Where this is issue is raised, check whether the effect is significant  often tobacco purchases account for a very small proportion of the basket of goods and services used to establish the CPI. Where there is a substantial impact, governments have the option of simply excluding tobacco prices from the price index used to set wage, pension or benefit levels, following the example of France and Luxembourg.39

Back to the regressivity argument

Proceed to argument “One size does not fit all”

38  E.g. “Inflationary and anti-poor”.

39 Tobacco Tax Administration Manual, pp. 94-95.

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