As many of you know, it has been announced that the SCT, which covers products in the alcohol and cigarette group, will be increased by 47 percent. It is known what the effect of this increase will be on people who regularly consume cigarettes and alcohol; So what effect will this hike have on those who do not consume these products?
Although you may think, “I don’t consume cigarettes or alcohol either,” unfortunately yes; This hike will also hit those who do not consume cigarettes and alcohol. If you are asking why, let’s look at these reasons together.
You may not be consuming; but they consume
Now look at it this way: You may not be smoking or drinking alcohol; however, the owners of the markets you frequently shop at, the shops you enter and the cafes you sit in consume. What will happen when the expenses of these people increase after the hike? You got it right; Naturally, the owners of these businesses will also increase the products they sell and the services they provide.
Of course, there are also recent hikes in other areas. Here, we need to specifically mention the hikes in diesel and electricity. The increase in the price of fuel used by drivers who supply the products we buy or other products made from those products, and transport them from one city to another when necessary (we are talking about food products such as vegetables and fruits in particular); That means an increase in the driver’s expense. So yes, he will get a raise too.
The electricity hike is also the same; Electricity is used without interruption to maintain the temperature of the products, especially in businesses selling food products. So what will happen when electricity is hiked? As the money coming out of the pocket of the owner of the business increases, our pockets will also burn. In short, whether you consume cigarettes and alcohol or not; this hike will find you somehow.
A ‘balance’ point must be found
Price hikes applied to addictive consumer products with low elasticity of demand; directly affects all inflation. At this point, we need to talk about ‘inelastic demand’ first. For example, if the price of a product increases or decreases by 10 percent, resulting in a 3 percent decrease or increase in the consumer’s demand for that product, it is called inelastic demand. When a 10% increase in goods causes a 30% decrease in demand, it is called elastic demand.
Cigarette and alcohol-like products are in the inelastic class. This means that even if the government raises more than 20 percent, the demand for these products will not decrease by more than 3-4 percent.
Another issue we should mention is the Laffer curve. The Laffer curve shows that income will not increase as a result of the government increasing taxes; It is based on the principle that when the opposite is applied, that is, when taxes are reduced, total income will increase. Accordingly, as the tax on the product rises, the number of products sold begins to decrease in the opposite way, and this causes a decrease in the tax revenue of the state.
The prices of alcohol sold in our country have been on the opposite side of the Laffer curve for a very long time already. However, with the latest hike, the decrease in tax revenue will make itself felt much more harshly. The most logical thing to do to remedy this situation is to determine an ‘equilibrium’ point. Unless a balanced amount is found that will both satisfy the government, not lower consumer morale and relieve complaints, this situation we are in is very, very difficult to improve.
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