Government Pricing Policy and Behavioral Consumption of Tobacco.

Abstract

This research examines the impact of tobacco tax on government revenues and consumer's behavior towards price increases. In this examines historical trends of tobacco tax hikes in Malaysia and consumer's reaction towards anticipated price increases. Methodology consisted of qualitative and quantitative data collection for triangulation in addition to review reports and studies of governmental and independent agencies. Findings suggest that price increases has a minimal affect on consumption habits. Addiction is the primary factor causing smokers to adapt to any anticipated price hikes. Youth below the age of 18 are the most sensitive segment of the smoker population to any price increases. This is attributed to lack of disposable income amongst Malaysia youth. Findings further shows that price increases in the form of taxes are in actuality means of generating extra revenue streams. Background Tobacco consumption has reached epidemic state according to the global tobacco report published by the World Health Organization " WHO " (WHO, 2015). Tobacco consumption has been in steady increase since WHO first report (WHO, 1996) in the developing world and particularly in Asia. Tobacco products according to WHO are products made either hundred percent or partially by tobacco leaf as raw material, which are intended to be smoked, sucked, chewed or snuffed. Although smoking is prohibited in government buildings and public facilities in Malaysia, such as shopping malls and university buildings, yet smokers is in the increase in percentage bases according to the Malaysian National Health and Morbidity Surveys carried out between 1996 and 2002.Tobacco contains nicotine, which is highly addictive psychoactive ingredient. WHO further confirms that tobacco use is one of the main risk factors for a number of chronic diseases, which include cancer, lung diseases, and cardiovascular diseases. This is relatively common phenomenon throughout the world. Currently many countries are introducing various legislations restricting tobacco advertising, consumption age, tax schemes on tobacco sales, and regulating public areas for smokers and non-smokers. Malaysia is one of those countries that has been busy regulating tobacco consumption areas and new tax schemes. Although Malaysia government has implemented tobacco control policy in 1993, the prevalence of tobacco is still rising. The importance lies in two areas; health and income generation. Hence, examining consumer's behavior towards tobacco pricing and the effectiveness of price increase policies through taxation is needed. Hence, in light of constant tobacco policy revision and steady tax increases, the problem examined in this research is to determine whether such policies are effective in reducing tobacco consumption and how the consumer reacts to such policies.