Resources Business of Tobacco

Undermining Government Tax Policies

March 1, 2015

Aimed at government officials and staff responsible for developing and administering government tax policy, this report from Tobacconomics looks at the seven common legal strategies used by tobacco companies to undermine the effects of strong tobacco-tax policy: 

  • stockpiling
  • changing product attributes or production processes
  • lowering prices
  • over-shifting prices (increasing prices by more than required by a tax increase)
  • under-shifting prices (increasing prices by less than a tax increase)
  • timing of price increases
  • engaging in price discrimination and/or offering promotions

It looks at each strategy in detail, addresses companies’ motivation for engaging in such strategies and the consequences for governments and companies; and recommends what governments can do to counter these strategies. Each strategy is illustrated with one or more country case studies.