Question

Cigarettes constitute a mere $20\%$ of tobacco consumption in India, and fewer than $15\%$ of the 200 million tobacco users consume cigarettes. Yet these $15\%$ contribute nearly $90\%$ of the tax revenues to the exchequer from the tobacco sector. The punitive cigarette taxation regime has kept the tax base narrow, and reducing taxes will expand this base. Which one of the following best bolsters the conclusion that reducing duties will expand the tax base?

• A. The cigarette manufactures' association has decided to indulge in aggressive promotion.
• B. There is a likelihood that tobacco consumers will shift to cigarette smoking if cigarette prices were to reduce.
• C. The cigarette manufacturers are lobbying for a reduction on duties.
• D. An increase in duties on non-cigarette tobacco may lead to a shift in favour of cigarette smoking.

Answer 1

The correct option is B There is a likelihood that tobacco consumers will shift to cigarette smoking if cigarette prices were to reduce.

The paragraph speaks on how even though cigarettes consumption is a fraction of the total tobacco consumption, it constitutes the majority of the tax earned through the sector. It also makes a conclusion than, the punitive taxes on cigarettes have kept the tax base small and narrow. We need a sentence that bolsters the conclusion. Hence we need an option that says, how the tax base can be widened. This can be achieved by reducing the prices, which will lead to more consumers of cigarettes and hence a wider tax base. Hence option (b) is the answer.