Vol. 2, Issue 12, Part A (2016)

Abstract
Sin Taxes have earned significant tax revenue for governments in developed economies or emerging economies. Such revenue from taxes on – unhealthy consumables like tobacco, alcohol, and cigarettes– has increased substantially, especially in the past few decades. For several decades now, intellectuals and sociologists have questioned the morality of governments in imposing sin taxes. Economists have also doubted the effectiveness of such sin taxes, in deterring consumers from buying tobacco, alcohol or gambling. This research proposal focuses on identifying the reasons for the surge in levy of sin taxes by national and local governments. It also evaluates the ‘internality of taxes’ and interaction between redistributive as well as corrective motives. This research paper concludes with investigating if the motives were dampened or amplified. The use of optimization taxes is discussed, apart from considering elasticity-based considerations for the same. Consumer demand was ‘elastic’ with respect to price, while there was a co-variation between such elasticity, bias as well as income of consumer. The research findings indicated that more than sin taxes, the use of non-salient taxes, persuasive advertising as well as ‘glaring’ warning signals on labels were more effective deterrents over sin taxes or corrective taxes. Findings indicate that most of the governments have expanded the scope of utility of such excise tax revenue and are delivering appropriate health care services in majority of the countries, with a few exceptions.