Differential Tax Treatment Can Lead to Product Substitution

Cigarette and roll-your-own-tobacco sales in Cyprus

When the 2008-2012 cigarette excise tax increases made cigarettes more expensive in Cyprus, some tobacco users quit, while others switched to relatively cheaper roll-your-own tobacco. Only after a substantial tax increase on roll-your-own tobacco had reduced the price difference between the two products in 2013, did the sales of both cigarettes and roll-your-own tobacco declined.