According to Ferghana.ru and Ozodlik Radiosi, the Uzbek government has just announced that as of January 1 the excise tax on all types of booze and smokes produced in the country is about to increase by 25-50%.
While the articles aren’t exactly riveting reading for us non-economist types, some of the details are interesting:
The excise tax (which is expected to be passed directly to the consumer) will increase by 25% on beer, liquor, and filtered cigarettes. Unfiltered cigarettes will get the heftier hike at 50%. Okay, so on the first pass I assumed that this was something like a public health measure (is it the “Year of Health” again already? Towards the end of the second decade, you could expect the “theme years” to start to repeat). Especially given that the highest tax increase is going to the “most unhealthy” item in the group, this seems like at least a good way to justify increasing the tax burden on what I can only assume is the majority of the population, given the general popularity of drinking and/or smoking.
But the otherwise politically savvy Uzbek government has its own philosophy. From Ferghana.ru:
Как заявляется, данная мера принята «в целях гармонизации налогообложения производителей алкоголя и табачных изделий в республике в связи с высокой рентабельностью этого производства».
Er… “As stated, this measure has been undertaken ‘for the purpose of harmonization of the tax-burden of producers of alcohol and tobacco products in connection with the high profitability of this industry.’”
Well, clearly a hallmark of truly modern society is the harmonization of the tax-burden of industry in connection with its overall profitability. Does any more need to be said?
Health, schmealth. It’s not just that the companies are making more money, their industries are actually growing. Cigarette production alone increased 19.8% last year alone to whopping total of 10.4 BILLION smokes made domestically by British-American Tobacco. While wine and liquor production was pretty much steady, domestic beer production also jumped about 20% last year.
First of all, 10.4 billion cigarettes? That’s no misprint. On one hand it seems potentially significant that the biggest hike in taxes is apparently targeted toward one of the few remaining large foreign-partnership companies left operating in the country.
But in the end, frankly, I’m still scratching my head. If excise taxes on products like these are usually passed directly to the consumer, how does increasing the rate “harmonize the tax-burden in connection with the high profitability?” I’m certainly no economist, but if prices go up, demand should go down. That seems like it might potentially be a pretty good thing, from a public health standpoint–but there’s apparently no discussion of public health at all in the new law. Booze, smokes, cars, airplanes, whatever. Money is money, and apparently it’s already been figured into the next year’s budget.
Really, to me it’s a good example of what it’s like to live in Central Asia. Abrupt policy change is quickly implemented with inscrutable explanation.
“People of Uzbekistan: starting in three weeks, you’ll have to pay 25-50% more for your booze and smokes because the tax-burden of industry must be harmonized in connection with its profitability. That is all.”
{ 17 comments }
Tobacco is a poison to the human body and so it make sense to increase the tax burden to an extent which will discourage its use;tobacco is so detrimental on public health and wealth that it should be made unaffordable and so the Uzbek government is on the right track here. excessive Alcohol also should be discouraged ,may be higher costs ,taxes might do the trick.
Booze is a line item in my proposed Central Asia travel budget. This news pushes back my departure date a smidgen.
do not smoking if you want to keep your healthy
Hmmm. are all of those cigarettes produced in Uzbekistan smoked there? Or even in Central Asia?
Here (in UK) BAT is the owner of some major brands.
There are accusations it colludes with certain elements to allow ‘unoffical’ import to the UK of UK brand cigarettes from other countries.
Just a thought.
Toralzay–
I don’t disagree with you that, um, smoking is bad for your health. That’s been a pretty well established medical fact for about 50 years. What’s most interesting to me about this story–as clearly stated above–is that according to the Uzbek government itself, health concerns don’t have anything to do with the new tax.
Dafydd–
That’s interesting. I have no idea if BAT products are exported from Uzbekistan or not, but I suppose there are ways we could find out.
I don’t recall ever seeing the Uzbekistan-made ones for sale in neighboring countries, but I’m not a smoker so I also don’t pay a lot of attention to that. Maybe someone else can come up with some info or some numbers.
come on Noah, let’s not be too picky on words.
If taxes on cigarettes are increased in Western Europe and US they applaud saying how wonderful – government cares about health of people.
When the same is done in Uzbekistan – you call it as “a good example of what it’s like to live in Central Asia.” Isn’t it arrogant view??
Btw, the link you provided about cigarette consumption in Uzbekistan is dead old – data from 1998 !!!
Check up latest data (2007). It says cigarette consumption in Uzbekistan is lowest among former Soviet states.
I said what I said. If the government announced it was going this because it was concerned about public health, then it wouldn’t have made an interesting story.
I also didn’t provide a link that shows cigarette consumption in Uzbekistan. I was a bit surprised to find that cigarettes are still a growth industry globally, and I thought that was interesting.
It’s great that the people of Uzbekistan apparently have the lowest cigarette consumption of all the former Soviet states (good on them! I like the people of Uzbekistan very much, I think that would probably become clear if you’re a longtime Registan reader).
The entire point of the post, however, is that since this apparently isn’t a public health issue, it’s probably some other kind of issue.
You’re more than welcome to assume that the government has only the most noble intentions in mind and simply fails to put them into words.
Yes, demand for drinking and/or smoking will go down due to the higher price. However, economicsts would say that the demand for those two goods are INELASTIC, meaning that the demand for those goods will not go down as much as other goods. People will still drink and smoke regardless of the price. Therefore, you would still make more money off the higher taxes, even when demand for those goods goes down.
You got to appuald the honesty of Ubzekistan.
And the anonymous Uzbekistan trolls emerge from the pipework of the Internet. Great story, Noah.
The difference between the West’s view of alcohol and tobacco and that in Uzbekistan is that public opinion actually has an effect on policy and the direction of politics. This isn’t about Western arrogance – this is just a news story produced on Registan to educate readers about the newest laws passed in Karimov’s Kingdom.
well, I use anonymious proxy, otherwise I can’t access this website using my ISP in Uzbekistan. Moreover, I am a temporary guest – trying to contribute to discussion while on the sickness leave
anonymious or not, opinion on a substance what counts. News story is great, but had some flows I tried to illuminate. I thought it was (Western) democracy which welcomes critisism and discussion – so I shared my opinion.
As for the legislation, it is not something unexpected as the article states. There have been already measures taken on ban of smoking in public places, sale of beer within 500 meters from schools in this year. Increase of tax (or harmonisation of sin tax) on tabacco & alcohol was a matter of time. There has been public discussion (promoted by World Bank) on this issue as well. It called for using price and non-price instruments to reduce tobacco consumption.
There is a consensus that price increase will lower demand on tabacco (estimated each 10% increase in price leads to 4% drop in demand). The measure is likely to have a prominent effect on smokers.
Are you THE Noah Tucker?
There are indeed several of us, but for G.L. Penrose I am “the” Noah Tucker. (The one who used to pester you with questions and borrow your books who probably had (and still has) the worst handwriting of any student you ever had.)
Welcome to Registan.net!
10.4 Billion cigarettes? It is appallingly big number. If all that is consumed in Central Asia, one can be pretty sure to see health disaster in coming years. It is indeed satisfying that at least some smokers will be discouraged by the higher cut on their pocket while buying cigarettes. One should really welcome the move even if the purpose was not really to save people from the harm caused by smoking. Besides, that will actually save significantly in costs on public health too. If smoking deserves discouragement in advanced countries (like USA, Canada, etc.), it deserves the same in a developing country too.
Central Asian citizens need to be aware that tobacco smoking is strongly discouraged in north America and western Europe due to its proven sickening effect on the body and that cigerette makers many which are owned by Western companies are now pushing these products on the people of central Asia and other developing countries.People should be strongly warned to stay away from these products.Also many Western companies are pushing unhealthy drinks like coca cola and similar drinks on central Asian countries and these contribute greatly to poor health in general and thus will hurt their national development.
I’d be interested to hear if there have been noticeable tax increases in other sectors of the Uzbek economy. Don’t discount the need for the Uzbek government to increase tax revenues to combat the the effects of the global recession on Uzbekistan.
oh come on guys, Uzbek budget does not depend on tax collection, otherwise the revolution could have hit Uzbekistan earlier than Ukraine (perhaps after Russia).
Any guess who these trolls are? Any sign the government of Uzbekistan is pushing back on the frontlines of the blogosphere? Russia and China have those 50-cent brigades. People paid to comment on blogs. I wonder if the GoU is doing the same. Just curious.
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