Vice Squad
Monday, October 20, 2003
Will the Prostitutes Be Next?

Sharp-eyed Vice Squad friend Michael Alexeev passes along this story on the one-day (October 20) strike by French tobacconists. They are upset about a recently implemented tax rise on cigarettes that has caused prices to increase 20%. High-quality cigarettes have seen their price increase from 3.90 to 4.60 euros per pack after implementation of the higher tax.

According to the article, an earlier 16% tax hike last January led to an 8% fall in cigarette sales. If by the 16% increase they mean that the retail price went up by 16% -- it's unclear in the article -- then an 8% decline in sales indicates a price elasticity of (minus) 0.5%, which is in line with many previous estimates. The article mentions, however, that the fall in sales is not matched by a fall in consumption, as illegal imports or other unrecorded acquisitions make up for most of the decline in official sales. This, too, is in line with some earlier studies, though the extent of the substitution is quite large here: the article says that consumption fell by only 1 or 2%, despite the 8% decline in sales.

In keeping with tradition, the strike involved roadblocks, this time at the border crossing with Germany. Apparently much of the tax avoidance has been accomplished through purchases in neighboring countries (Germany, Spain, Belgium) with lower taxes on cigarettes.

Update, October 21, 2003: Today's Chicago Tribune also includes an article about the tobacconists' strike. "Some 20 million French smoke -- over a third of the population -- as do 50 percent of youths aged 15-24, the highest rate in the European Union, government figures show." The non-virtual version of the article also notes that this summer, a minimum purchase age of 16 was established for tobacco products in France.

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