• Service: Advisory
  • Type: KPMG information
  • Date: 3/12/2013

GDN Research Paper: An Optimal Tobacco Tax 

The main objective of this work is to find the optimal specific tobacco tax that will at least cover the amount that the Mexican society (including the government) spends in correcting the externalities of the industry in question.
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The tobacco industry in Mexico, as a whole, takes away more from society than what it contributes to the economy. This is because some of its externalities, such as tobacco-attributable diseases and the consequent losses in productivity – adding up to some $52,000.0 million MXN – far outweigh the industry’s value added to the economy, including taxes, totaling to approx. $39,413.3 million MXN. So, for every $1 MXN that comes from the tobacco industry, another $1.32 MXN is lost, indirectly, to the industry itself. Also, for every employee of the industry, there are between 5 to 15 consumer deaths each year from tobacco-related diseases.