1. 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., April 2017
The views expressed here do not necessarily represent those of the Central Bank of Turkey.

2. 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: /tobaccocontrol
A longer version:
Atuk O, Özmen MU., "Firm Strategy, Consumer Behavior and Taxation
in Turkish Tobacco Market", Central Bank of Turkey Working Papers, 2015.

3. 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)

4. 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.

5. Formulation of Cigarette Price in Turkey
Source: Atuk and Özmen (2016), Tobacco Control

6. Evolution of Special Consumption Tax in Turkey
Current rates: Ad valorem: %; specific =0.3 TL/pack
Source: Atuk and Özmen (2015), CBRT Working Paper

7. Sales Price (TL) Current prices: ~ 12.5 / 10.5 / 8 TL.
Source: Atuk and Özmen (2016), Tobacco Control

8. Price Gap between Segments (TL)
Source: Atuk and Özmen (2016), Tobacco Control

9. Total Sales
Source: Atuk and Özmen (2016), Tobacco Control

10. Sales Share (%)
Source: Atuk and Özmen (2016), Tobacco Control

11. Price Elasticity of Demand
Source: Atuk and Özmen (2016), Tobacco Control

12. Price Elasticity of Demand
Source: Atuk and Özmen (2016), Tobacco Control

13. 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