The Differential Pass-Through of Taxes to Prices: A cross-country analysis of cigarettes and novel nicotine products

The Differential Pass-Through of Taxes to Prices: A cross-country analysis of cigarettes and novel nicotine products | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article The Differential Pass-Through of Taxes to Prices: A cross-country analysis of cigarettes and novel nicotine products Estelle Dauchy, Samantha Filby This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7075930/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 8 You are reading this latest preprint version Abstract Despite global declines in tobacco use, novel and emerging nicotine and tobacco products (NENTPs), such as heated tobacco products (HTPs) and e-cigarettes, are attracting new users, threatening global progress in reducing tobacco consumption. Many governments use taxation to regulate the demand for these products, but NENTPs often face lower taxes than cigarettes due to their perceived “reduced-risk” status, classification issues, or policies encouraging cigarette smokers to switch. The effectiveness of tax policies in reducing nicotine use depends on how taxes translate into retail price changes. This study is the first to simultaneously estimate tax pass-through to prices for cigarettes, HTPs, and e-cigarettes in countries where all three of these products are sold. Using two-way fixed effects models and seemingly unrelated regressions on a unique dataset of taxes and prices across over 60 countries from 2014 to 2023, we analyze tax pass-through overall, in high-income countries (HICs), and in low- and middle-income countries (LMICs). Results show that cigarette and e-cigarette taxes are generally over-shifted to prices, while HTP taxes are under-shifted. However, pass-through varies by country income level: cigarette and e-liquid taxes are over-shifted in HICs but under-shifted in LMICs, while HTP taxes are under-shifted in HICs and over-shifted in LMICs. Evidence of cross-tax effects between products suggests that governments should implement simultaneous tax measures across all nicotine products to effectively reduce overall consumption. These findings highlight the need for tailored, comprehensive tax strategies to address the evolving nicotine market. JEL Classification: H20 , H26 , H32 , H71 Heated Tobacco Products Electronic Nicotine Delivery Systems Cigarettes Tobacco Products Excise Tax Pass-through Pricing Strategies Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Under Review Version 1 posted Editorial decision: Revision requested 11 Nov, 2025 Reviews received at journal 15 Oct, 2025 Reviewers agreed at journal 11 Aug, 2025 Reviewers agreed at journal 16 Jul, 2025 Reviewers invited by journal 15 Jul, 2025 Editor assigned by journal 13 Jul, 2025 Submission checks completed at journal 10 Jul, 2025 First submitted to journal 08 Jul, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. 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