The effects of excise tax changes on alcoholic beverages and tobacco consumption in Thailand

The purpose of this thesis is to examine the factors affecting the likelihood of consumption and the amount spent on alcoholic beverages and tobacco in Thailand using the 2009 Socio-Economic Survey of Thailand. Results suggest that household size, tenure and occupation have significant impacts on both the probability of alcohol and tobacco consumption and spending levels. Income also plays a key role in explaining the amount spent on alcoholic beverages and tobacco. Demand elasticities are calculated under the Extended Linear Expenditure System (ELES). Demand for alcoholic beverages and tobacco is found to be inelastic. The effects of increasing taxation on alcohol and tobacco consumption in Thailand are estimated. The findings are that excise taxes in Thailand are efficient taxes with only a modest rise in deadweight loss. Taxes result in a small decrease in consumption but generate higher expenditure and government tax revenue. Excise tax on alcoholic beverages results in a net benefit to the Thai economy. Tobacco taxes increase total expenditure and government revenue as well as increasing net benefit to the Thai economy. However, the low elasticities of demand also mean that excise taxes have only a small impact on reducing the costs associated with drinking and smoking.