This paper applies a comprehensive tax-benefit incidence analysis to estimate the distributional effects of fiscal policy in Chile in 2013. Four results are indicative of an overall positive net effect of fiscal interventions on poverty and inequality. First, subsidies exert a positive, yet modest effect on poverty and inequality, whereas direct transfers are progressive, equalizing, and reduce the poverty headcount by 4 to 5 percentage points, depending on the poverty line used. Second, although social contributions are unequalizing

Tobacco taxes are deemed regressive, because the poorest families tend to allocate larger shares of their budget to purchase tobacco. However, as taxes also discourage tobacco use, some of the most adverse effects, including higher medical expenses, lower life expectancy at birth, added years of disability among smokers, and reduction in the quality of life, among others, would be reduced. This paper describes and simulates the effects of the tobacco tax on incomes in Chile assuming three different price-elasticity scenarios for different income deciles of the population. The results show that although increasing the price of tobacco through higher taxes generates negative income variations across all groups in a population, under a more comprehensive scenario that includes benefits through lower medical expenses and an increase in working years, the results invert, and the overall monetary effect of the taxation policy becomes positive. Moreover, the reduction in medical expenses seems to be the main driver of the increase in net incomes, because of the reduction in tobacco-related problems that require expensive treatments. Lastly, as the distributional effects of tobacco taxes are directly related to the long-term price elasticities of tobacco consumption, it would be advisable to coordinate taxation and behavioral change policies across income groups.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

No abstract

Cover photos (clockwise from left): iStock 'Cox's Bazar, Bangladesh -February 09, 2013: Men working in paddy field in the suburb of Cox's Bazar, Bangladesh.' iStock Rickshaw Jam, High school girls taking notes. Suapur, Bangladesh.Photo: Scott Wallace/ World Bank 2 Bidis are popular hand rolled tobacco products smoked in South Asia.. 3 Note that the true smoking prevalence among women may be greater than estimated because evidence suggests that women (and those who proxy-respond for them in surveys) tend, for social reasons, to underreport risky behaviors.. 4 Data on tobacco consumption vary in terms of coverage, period, and quality. These numbers come from the 2009 Global Adult Tobacco Survey Bangladesh.The distributional impacts of cigarette taxation in Bangladesh // IntroductionThe high rates of tobacco consumption in Bangladesh impose an increasing health and economic burden on the country. A 2004 epidemiological study found that 1.2 million tobacco-related illnesses and nearly 57,000 deaths attributable to smoking were reported each year (WHO 2007). More current information shows that approximately a quarter of all deaths among men ages 25-69 in Bangladesh are attributable to smoking (Alam et al. 2013). The overall economic cost of tobacco use has been estimated at Tk 110 billion (US$1.85 billion) or over 3 percent of gross domestic product (GDP) (WHO 2007). The government has undertaken efforts to tackle tobacco consumption. It was among the first to sign (June 2003) and ratify (June 2004) the World Health Organization's Framework Convention on Tobacco Control, the world's first public health treaty, which urged governments to adopt comprehensive policies to limit tobacco use. The country's participation in the framework convention has led to advances in tobacco control policy, in particular through the 2005 Smoking and Tobacco Usage Act. The new law restricted smoking in certain locations, though health care facilities, educational facilities, sport venues, and taxis were the only 100 percent smoke-free environments in Bangladesh at the time. 5 Warning labels on cigarette packages and the limited advertising of tobacco products were also mandated as part of the 2005 law. According to the 2009 Global Adult Tobacco Survey and the International Tobacco Control Bangladesh Survey, tobacco consumption rose between 2009 and 2012, despite the government's actions to restrain it. Among the negatives of the Smoking and Tobacco Usage Act were the low levels of enforcement of non-tax measures, including the advertising ban and smoke-free public places, and relatively low levels of implementation of the warning labels. In April 2013, the NationalAssembly passed the Tobacco Control Law Amendment Bill and Rules to close many of these loopholes. A major contribution of the amendment was the requirement that packages contain pictorial warnings. In addition, smokeless tobacco was included under the definition of tobacco; restaurants and indoor workplaces were included among completely smoke-free environments; the fines for...

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.