The chapter aims to analyze the impact of cigarette taxes evolution over the period 1992-2017 on the revenue share of the main tobacco supply chain stakeholders in Greece. This empirical analysis uses a pooled time series from 1992 through 2017 including a data set of retail prices, three tax groups levied on cigarettes (specific tax, ad valorem tax, and V.A.T.), and revenue shares for three categories of stakeholders. The results indicate that the revenue share of the stakeholders is decreasing over the whole period, and specifically, their shares drop by half in the last 15 years. The regression results show that the revenue shares of tobacco companies are most affected by both excise taxes in a negative way, and similarly, both price and the excises affect significantly the revenue share of retailers, whereas the findings regarding distributors' revenues are insignificant. This knowledge is likely to be useful for policymakers in the development of effective tobacco control policies.
TopIntroduction And Literature Review
Tobacco consumption is the leading preventable cause of mortality and one of the largest avoidable health risks in the European Union (EU) (see e.g. WHO, 2008; Gruer et al., 2009; Eriksen et al., 2015). Especially in Greece every year, more than 22,700 of its people are killed by tobacco-caused disease (see e.g., Drope and Schluger, 2018). Still, more than 12,000 children, aged 10-14 years and 256,000 adults (15+ years old) continue to use tobacco each day. Besides, the economic cost of smoking in Greece amounts to 4,663 million euro, including direct costs related to healthcare expenditures and indirect costs related to lost productivity due to early mortality and morbidity. Tobacco taxation is an efficient tobacco control tool for reducing the smoking prevalence and its harmful consequences. On the flip side, though, it is an important source of revenue, making it an interesting topic for branches of economics concerned with this issue (see e.g., Goodchild et al., 2016). Tobacco supply chain involves many types of activities employing a substantial number of employees.
Our paper aims to analyze the impact of cigarette taxation and price evolution over the period 1992-2017 on the revenue share of the main tobacco supply chain stakeholders in Greece; Tobacco Companies, including producers and importers, Wholesalers – Distributors and Retailers. In particular, we indent to show whether and how the changes in cigarette prices, and every type of tax levied on cigarettes are related to the changes in the revenue shares of each stakeholder.
The tobacco market in Greece is highly competitive and dominated by four large multinational companies: Philip Morris International (PMI) (including Papastratos), British American Tobacco (BAT), Japan Tobacco International (JTI), Imperial Tobacco (IT) and three Greek tobacco companies; Karelia Tobacco Company, SEKAP SA and Georgiades Th. D. Cigarettes Industry S.A (see e.g. Executive Agency for Health and Consumers, 2013). The four multinational companies control almost the 79% of the cigarette market. Despite the strong presence of multinationals, the domestic manufacturer Karelia Tobacco Company manages to rank second in 2015 with an 18% retail volume share (see e.g. Euromonitor International, 2016). This increasingly competitive tobacco environment is characterized by continuous mergers and acquisitions, causing a significant loss of volume share for Greek manufacturers during the crisis period of 2009 and afterwards (see e.g. Harvard School of Public Health, 2011).
The distribution of tobacco products remained fairly stable in Greece in 2018, as the dominant channel of newsagent-tobacconists/kiosks continued to gradually lose retail volume share to convenience stores and the number of kiosks continued to decline due to the recession (see e.g. Harvard School of Public Health, 2011). Regarding the retail of tobacco products, legislative changes mid-review period contributed to the growth in the sales of tobacco through convenience stores, as it allowed the sale of tobacco on the same premises as fresh groceries, which means that all convenience stores can sell tobacco products, whereas previously only a limited number of chains were qualified to do so.
Smoking prevalence throughout EU of varies greatly between the 28 Member States, while the highest shares of current smokers for 2014 were recorded in Bulgaria (34.7%) and Greece (32.6%) (see e.g. Eurostat, 2016). The heterogeneity of smoking prevalence between EU Member States reflects, at least in part, a failure by governments to prioritize public health over the tobacco industry (Bogdanovica et al., 2011). Although globally, states intervene through taxes or other tobacco control policies in order to reduce tobacco consumption (see e.g., Chow, 2017), a growing evidence highlight tobacco industry’s active role in opposing tobacco control legislation by biasing both scientific and public opinion (see e.g., Dearlove et al., 2002; Muggli et al., 2004; Diethelm et al., 2005; Gruning et al., 2006). Evidence also reveals that Transactional Tobacco Companies lobby governments for keeping cigarettes affordable in Finland (see e.g., Hiilamo, 2003), Hungary (Szilágyi and Chapman, 2004), and other countries (see e.g. Gilmore et al., 2007; Krasovsky, 2010).