Tobacco Taxation in Turkey:
Evidence from Detailed Brand Level Monthly Price
and Sales Data
M. Utku ÖZMEN
Economist
Central Bank of Turkey
World Bank Group Tobacco Taxation Conference,
Washington D.C., 18-19 April 2017
The views expressed here do not necessarily represent those of the Central Bank of Turkey.
The discussions in this presentation are based on:
Atuk O, Özmen MU., "Firm strategy and consumer behaviour under a
complex tobacco tax system: implications for the effectiveness of taxation
on tobacco control", Tobacco Control 2016;0:1–7.
doi:10.1136/tobaccocontrol-2015-052808
A longer version:
Atuk O, Özmen MU., "Firm Strategy, Consumer Behavior and Taxation
in Turkish Tobacco Market", Central Bank of Turkey Working Papers, 2015.
Tobacco Products Market:
Different Parties, Contrasting Incentives
• Fiscal Authority
• (cares for tax revenue and its stability)
• Health Authority
• (cares for reducing tobacco consumption)
• Economic Policy Authority
• (may care for production)
• Firms
• (care for increasing consumption, lobbying activity)
• Non-profit organizations
• (care for reducing consumption)
Sequential Market Formation
• Fiscal Authority sets the tax combination:
• Ad valorem and/or specific
• Firms determine final sales price:
• Product differentiation;
• Cigarettes for different price segments
• Consumers choose:
• What segment to consume
• How much to consume
• Final sales amount and final tax revenue are determined.
Formulation of Cigarette Price in Turkey
Source: Atuk and Özmen (2016), Tobacco Control
Evolution of Special Consumption Tax in Turkey
Current rates: Ad valorem: 65.25 %; specific =0.3 TL/pack
Source: Atuk and Özmen (2015), CBRT Working Paper
Sales Price (TL)
Current prices: ~ 12.5 / 10.5 / 8 TL.
Source: Atuk and Özmen (2016), Tobacco Control
Price Gap between Segments (TL)
Source: Atuk and Özmen (2016), Tobacco Control
Total Sales
Source: Atuk and Özmen (2016), Tobacco Control
Sales Share (%)
Source: Atuk and Özmen (2016), Tobacco Control
Price Elasticity of Demand
Source: Atuk and Özmen (2016), Tobacco Control
Price Elasticity of Demand
Source: Atuk and Özmen (2016), Tobacco Control
Lessons from the Turkish Case
based on Atuk and Özmen (2016)
• Tax increases are very effective on reducing the consumption
of Economy and Medium segment cigarettes
• Though, the availability of cheaper alternatives limits the
effect of tax increases on consumption
• Demand for Premium segment cigarettes is price inelastic
• Relatively rich consumers are not induced by price hikes
• Thus, non-price measures for preventing consumption may be
more effective on such consumers