Assignment EconomicsExecutive Summary

Assignment Economics
Analysis of the German tobacco tax policy
Study Program
Master of Business Administration (MBA)
Module: Economics
Assignment: No. 1/2
Course Instructor: Prof. Dr. M. Wilhelm
Author(s): Steve Aemisegger
Student ID Number(s): XXXXXX
1st
Academic Semester 2010
Munich, January 08th
, 2011

Analysis of the German tobacco tax policy page 2
Executive Summary
In this assignment a review and analysis of the governmental tax revenue for
the last decade has been made.
Results of the calculation of the price elasticity have shown the following
results:
- High negative price sensitivity of cigarette sales because of
increase in governmental tobacco tax.
- A relaxation of sales decrease for cigarettes during the last three
years with a tendency of inelastic price sensitivity.
These results are mainly due to the remarkable price differences of
cigarettes in European countries. The taxation of shag has been lower
compared to cigarettes. As an example, the price for a package of cigarettes
amounts in Poland in comparison to Germany is 61% less.
Therefore people increased to smoke cigarettes made out of shag.
Moreover, smuggling as well as the consumption of cigarettes which are not
taxed in Germany has been causing governmental tax losses and economic
damage of about 5.2 bn. Euros in total. The decrease of consumption during
the last years has been much lower during the time when taxes did not
increase or only to a very small extent. The consequences for increasing the
governmental tax incomes are:
- price adaptions of the European cigarette prices
- stricter controls of cigarette imports
- more moderate price increases
Furthermore, the biggest share of smokers is between 19 and 29 years old.
If price increases have to be done with the intent to reduce smoking, it has to
be focused on the young consumer who pays attention to high cigarette
prices and remarkable increases.

Table of Contents
Table of Contents
1 Introduction..........................................................................................................................7
2 Problem Definition................................................................................................................8
3 Objectives .............................................................................................................................8
4 Methodology ........................................................................................................................9
5 German tobacco tax system ...............................................................................................10
5.1 Principle and functions ................................................................................................10
6 Cigarette pricing..................................................................................................................11
6.1 The price composition of a cigarette (2009)................................................................11
6.2 Price increase per cigarette.........................................................................................12
6.3 Governmental tax increases........................................................................................13
7 Consumer behavior.............................................................................................................13
7.1 Consumption of tobacco products ..............................................................................13
7.2 Price elasticity..............................................................................................................14
8 Tobacco consumers ............................................................................................................16
8.1 Consumer categories...................................................................................................16
8.2 Health aspects, higher risk of diseases and financial consequences...........................17
8.3 Who bears the burden of the tobacco tax, consumers or producers? .......................18
9 German economic and influences of bordering countries.................................................18
9.1 Cigarette price differences between European countries...........................................18
9.2 Economic damage of not in Germany taxed cigarettes ..............................................18
10 Results...............................................................................................................................20
11 Conclusion.........................................................................................................................21
12 The authors view ..............................................................................................................21
13 ITM Checklist.....................................................................................................................22
13.1 Strategic Management ..............................................................................................22
13.2 Marketing ..................................................................................................................22
13.3 Financial Management ..............................................................................................22
13.4 Human resource management..................................................................................23
13.5 Business law...............................................................................................................23
13.6 Research methods / management decision making .................................................23
13.7 Soft skills / leadership................................................................................................23

List of Abbreviations
BAT British American Tobacco
BZgA Bundeszentrale für gesundheitliche Aufklärung
Destatis Statistisches Bundesamt Deutschland
DKFZ Deutsches Krebsforschungszentrum
DZV Deutscher Zigaretten Verband / German cigarettes association
GDP Gross Domestic Product
GEDA Gesundheit in Deutschland Aktuell, Robert Koch Institut
HWWI Hamburgisches Weltwirtschafts Institut
IFO Institut für Wirtschaftsforschung, München
RKI Robert Koch Institute, Berlin
VDR Verein deutscher Raucher
WHO World health organization
mill. million, 1 Million is equal to 106
bn. billion, 1 Billion is equal to 109

List of Figures
Figure 1: Split-up of a *cigarette price of 24.74 cent………………………....11
Figure 2: Price development cigarette / Marlboro…………………………...12
Figure 3: development consumer price index / tobacco products………….12
Figure 4: Cigarettes /shag consumption per habitant for two decades ……15
Figure 5: tobacco tax revenue and forecast…………………………………..16
Figure 6: Age groups of smokers………………………………………………17
Figure 7: Market of tobacco products 2009…………………………………...20
Figure 8: Decrease of cigarette consumption and increase of taxes………21

List of Tables
Table 1: Governmental tobacco tax increases 2000 – 2010………….……13
Table 2: Price elasticity…………………………………………………………15

1 Introduction
Following the price increase of cigarettes during the last decades, you may
find out that a packet of cigarettes is getting more and more expensive.
Between the two last decades, the price for one packet of cigarettes almost
doubled. The price difference between the production cost for a packet of
cigarettes and the selling price seems to be enormous. In fact, the portion of
tobacco tax and added value tax of one packet of cigarettes constitutes
currently about 75% of the selling price.
The German tobacco tax receipts for 2009 are more than 13 billion Euros.
The government is dependent on the tobacco tax income which is together
with the mineral oil tax (income: 42.2 billions, 2009) the most profitable
excise duty.
For the last decade, in Germany, the tobacco consumption per person
decreased and job losses in the tobacco industry can be recognized.
Simultaneously, tobacco smuggling increased remark, which caused
enormous tax losses for the German government. Therefore, the main
question to be asked is under what circumstances it would make sense to
increase the tobacco tax if the tax incomes have to be increased.
Furthermore, according to an estimate by the WHO, the annual death rate
due to diseases related to tobacco consumption, increased to a share
between 110´000 – 140´000 people. Hence, another important issue would
be the question of how to increase the tobacco tax in order to reduce the
number of smokers.

2 Problem Definition
For the German government, the tobacco tax income losses during the last
decade represent a major financial issue. There are several reasons how it
came to a decrease of the tax income. Therefore it has to be analyzed:
- Under what circumstances would it make sense to increase the
tobacco tax with the intention to increase the revenue.
The influence on the state of health of smokers due to tobacco consumption
is considerable. In order to be able to reduce the death rate it has to be
analyzed:
- Under what circumstances would it make sense to increase the
tobacco tax with the intention to discourage smoking.
Every tobacco tax increase has to be financed. Who really bears the burden
for those increases, the customer or the producer?
3 Objectives
The first objective of this assignment is to find out under what circumstances
it makes sense to increase the tobacco tax in order to increase the tax
incomes. The price elasticity will be calculated, the influences and decencies
analyzed.
A necessary prerequisite is to figure out the coherence of tobacco tax
increases and their influences on tobacco consumption. Another objective is
to find out under what circumstances it would make sense to increase the
taxes in order to discourage smoking. In this assignment, the author will
attempt to discuss who bears the burden of the tobacco tax and present a
conclusion whether it makes sense or not to increase the tobacco tax.

4 Methodology
To get a better impression of the German tobacco tax a short explanation
will be done. Revenues and tax hikes during last decade will be shown and
an overall analysis will give some important information. The influences of
the tobacco consume related to the tax increase will illustrate coherences
and show more precise under what circumstances it would make sense to
increase the tobacco tax revenue. A price elasticity analysis will help getting
more precise answers about past consumer reactions.
Along with this conclusion, an analysis comes of how the tobacco consumer
reacts after tax hikes and what the results concerning the tax revenue could
be. Finally, an explanation of the cigarette pricing with economical approach
will show more precisely if the tobacco consumer or producer bears the
burden of the tobacco tax.

5 German tobacco tax system
5.1 Principle and functions
According to the German tobacco tax law (TabStG, § (1)), the tobacco tax
belongs to the group of excite duty as this is the case for the beer-, coffee-,
brandy-, mineral oil tax as well as for the value added tax.
The definition of an excite duty describes very often the objective of burden,
e.g. the purpose of the tobacco tax is to tax the consumption of tobacco
(Kempf, 2005, p.134). The tobacco tax as an indirect tax makes part of the
total price of the product, in this case the cigarette. The tax is completely
passed on to the consumer (Kempf, 2005, p.138). The economically charged
party is the consumer, the producer is the tax deptor and pays the tax
directly to the government. Due to the fact that the tobacco tax is a federal
tax the complete revenue belongs to the government and can be invested
without any appropriation which is called nonaffectation (Isensee, 2007, p.
1199).
The four tax maxims of Adam Smith (Adam Smith, 1776, p.263), tax equality,
certainty , i.e. the duty of payment, the convenience of payment and the
economy in collection has still a certain significance and forms the basis for
the current tax law.
The third maxim (economy in collection), i.e. imperceptibility of the taxation,
will be analyzed more precisely. Tipke and Lang have mentioned that the
basic principle of imperceptibility requires that a tax will not be increased in
an inappropriate moment and in an inconvenient manner. Otherwise the
taxation becomes a crucial factor and the efficient allocation of the resources
and the economic development will be limited (Tipke & Lang, 2002). The
imperceptibility will be obtained in a way that the consumer does not really
realize both the tax and the tax increase. In fact, even if an indirect tax
should be imperceptible, the consumer does notice tax increases (Neumark,
1970, p.40).

6 Cigarette pricing
6.1 The price composition of a cigarette (2009)
The price of a package of cigarettes consists of several components.
Therefore a short analysis will show the exact split- up. The following
example shows a split- up of a premium cigarette.
Basically, the price is divided into the economical and the tax part. The
economical part can be divided again into the commerce and producer part.
The net price derives from the sum of the tobacco tax, the commerce and
the producer part. The tax part consists of the value added tax (19% of the
net price) and the tobacco tax. The tobacco tax as shown below can be
calculated by a specific amount which will be defined by the government
(currently: 8.27Cent/ cigarette, 21.10.2010) plus the proportional part of the
retail price. The retail price for one cigarette is defined by the producer or the
importer (§ 3, TabStG).
8,27 Cent/cigarette + (24,66% of the retail price) = tobacco tax/ cigarette
(Specific part) (Proportional part)
Figure 1: Split-up of a *cigarette price of 24.74 Cent (Source: DZV 2009)
*Premium product (4,70€ /19p, 22.07.2009), value added tax calculations based on a tax
rate of 19% of the net price, split- up of commerce and producer portion can differ

6.2 Price increase per cigarette
During the last decade, the price of one cigarette increased about 57%. For
getting a better feel, an analysis of the development of the consumer price
index is one possibility. The consumer price index shows how the living
expenses for private households changes due to price changes (for this
analysis, the consumer behavior has been constant). The below chart on the
right side shows the development of the consumer price index compared to
the cigarette price development. The following example on the left side
shows the most consumed cigarette brand in Germany (DZV, 2010). The
dates on the abscissa represent the cigarette price increase. The price
increase can be referred either to a tax increase, the modification of the law
(e.g. increase of minimum number of cigarettes from 17 pieces to 19) or to
an industrial increase due to the tobacco price rise.
Figure 2: Price development cigarette / Marlboro Figure 3: development consumer price index / tobacco products
Source : DZV 2009 Source : Destatis / consumer price index
The chart on the right side shows that the increase of tobacco products is
proportionally much higher than the general cost of living. This circumstance
is the consequence of several big price increases.
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
2002
2003
2004
2005
2006
2007
2008
2009
development consumer price index [%]
development cigarette price [%]
Development consumer price index [%]
Price development tobacco products [%]
0
2,5
5
7,5
10
12,5
15
17,5
20
22,5
25
27,5
01.01.2002
01.01.2003
01.03.2004
01.12.2004
01.12.2005
01.01.2007
01.06.2009
22.07.2009
Cent/ cigarette

6.3 Governmental tax increases
The following list shows the tax increases for cigarettes between 2000 and
2010, as defined by the government.
The currency translation for taxes before 2002 has been calculated as follows: 1DM = 0.511 Euro
* Specific amount : See chapter price composition of a cigarette 2009
* Retail price : Average value of different cigarette producers, calculated by Destatis
Table 1: Governmental tobacco tax increases for cigarettes 2000 – 2010 (Source: Destatis)
7 Consumer behavior
7.1 Consumption of tobacco products
The purchasing behavior is a complex process to be analyzed, it is
depended of many different influences and factors. The customer, for
instance, can change the way of thinking and living, the general economic
situation can change or the budget of a private household does not allow
consuming a certain product anymore. In the case of the tobacco consume,
the addictive behavior has an important influence as well. The following
diagram shows the demand for shag in Germany, which almost doubled
from 1994 to 2009, while the demand for cigarettes decreases. For being
able to evaluate the influence of the decrease of cigarettes consumption, the
proportional tax revenue of shag and cigarettes due to the total tobacco tax
income needs to be analyzed. The German tobacco tax income 2009 was
about 13,35 bn. Euros. This amount is divided into cigarette taxes (12,14 bn.
Euros), which is 89,6% of the total, taxes shag (1,3 bn. Euros), which is
9,8%, and cigars/ pipe tobacco taxes together which is ~ 0.7% (Destatis). It
can be said that
Year *specific amount Percentage of retail price *retail price Minimum price
12/2000 4,95 Cent 21,6 % 14 Cent 7,0 Cent
11/2001 5,09 Cent 21,6 % 14 Cent 9,3 Cent
01/2002 5,59 Cent 23.31 % 15 Cent 9.31 Cent
01/2003 6,17 Cent 24,23 % 16 Cent -
03/2004 6,85 Cent 24,27 % 18 Cent 13.5 Cent
12/2004 7.56 Cent 24,82 % 18 Cent 14,87 Cent
09/2005 8,27 Cent 25,29 % 20 Cent 16,23 Cent
01/2007 8,27 Cent 24,66 % 22 Cent 17,11 Cent
04/2010 8,27 Cent 24,66 % 23 Cent 17,11 Cent

the most important part is still the revenue due to tax for cigarettes even if
the consumption of shag increases.
Figure 4: Cigarettes and shag consumption per habitant for two decades (Source: Destatis)
7.2 Price elasticity
The price elasticity is a measure for the relative demand if a relative price
change has taken place. In order to answer the question under what
circumstances it makes sense to increase the taxes to get higher revenue,
this calculation can be used.
It shows how many percent the demand decreases if the price increases one
percent. The price elasticity results from the quotient of the percentage
change of the demanded quantity and the percentage change of price.
η : 0 < 1 Inelastic demand, the consumer does not reduce the
consumption or switch to another product, no price sensitivity.
η : > 1 Price increases are getting more sensitive, the consumer
changes the manner of consumption. From the economical point of view, the
benefit is decreasing.
0
50
100
150
200
250
300
350
400
450
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
1991 1994 1997 2000 2003 2006 2009
gram
/
habitant
piece
/
habitant
cigarette consumption per
habitant [piece/ habitant] (scale
left side)
shag consumption per habitant
[gram/habitant] ( scale left side)

Tax increase 2004: the calculation includes both increases in one
Results of row two and three have been calculated based on the most consumed cigarette in Germany (DZV)
Table 2: Price elasticity (governmental tax increase and industrial price increase)
The price elasticities between 2003 and 2009 due to governmental tax
increases (first row), which are lower than -1, shows that the cigarette
consumption is decreasing and sensitive. The second row shows the price
elasticity due to the increase of the specific amount and the percentage of
retail price defined by the producer. Those values are as well negative but
not sensitive. The results in the third row shows the price elasticity of a
package of the most consumed cigarette in germany. Those negative values
means that there is some decrease in consumption, but the tendency of the
development from 2006 on is zero. That means that the demand is getting
inelastic.
The ifo Institute already mentioned in 1995 that the cigarette consumption is
following a saturation. This curve is only a model, commonly used for
predictions (Körner, 1996, pp 2–4). The saturation function which has been
generated as depicted, is based on a mathematical function (Papula, 2000,
p. 104). The yellow part of the curve represents the forecast values of the
Federal ministry of finance, Germany (Datensammlung zur Steuerpolitik, 2010).
Figure 5: tobacco tax revenue and forecast (Source:Datensammlung zur Steuerpolitik 2010)
0
2
4
6
8
10
12
14
16
1980
1984
1988
1992
1996
2000
2004
2008
2012
tobacco
tax
revenue
[bn.
Euro]
blue = tobacco tax revenue (bn.Euro)
yellow = tobacco tax revenue forecast
(bn.Euro)
function of saturation

It has been argued that the Laffer- Curve is especially suitable for describing
tax increases and tax revenues (Thöne, 2008). For further analysis this
could be a possible approach.
8 Tobacco consumers
8.1 Consumer categories
Almost 30% of the German population which makes about 24,4 million
people is smoking cigarettes. This result originates from a study which has
been called “Gesundheit in Deutschland aktuell (GEDA) 2009”. The smoking
rate referring to the masculine population in Germany is actually 34% (~ 13.6
mill.) in comparison to the rate of the feminine population which makes about
26% (~10.8mill). It can be inferred from the following chart that especially the
percentage of young adults smokers is extremely high. People who belong
to the age group of 65 and above do smoke remarkably less.
Figure 6: Age groups of smokers Source: Gesundheit in Deutschland (GEDA)2009
Furthermore, the results of the GEDA study (GEDA, 2009), based on Health
surveys from RKI, concluded that since 2003 the percentage of smoking
adults decreased by two percent (Lampter & List, 2010 a). The chart above
shows that the first and second age groups are the most relevant.
0% 10% 20% 30% 40% 50%
65 +
45-64
30-44
18-29 men
women
age (years)

8.2 Health aspects, higher risk of diseases and financial consequences
In Germany, the number of tobacco related deaths is between 100000 and
140000 people every year. Over 44% of the young people at the age of 16 to
17 year do smoke (figure 6 above). The increase of tobacco consumption is
attributed to the tobacco consumption of children and young adults.
Especially this trend is influencing the health of citizens. The real
consequences are almost impossible to be estimated. Not only the health of
smokers is endangered, but also the health of passive smokers, especially
kids. Passive smoking increases the risk of cancer remarkably. Every third
person is particularly affected (Lampter & List, 2010b).
It has been recognized that a price increase of tobacco products reduces the
number of young adult smokers due to financial reasons (Dkfz, 2005 b). The
same assumption has been made by Horst Bossong. Furthermore, he noted
that the government increases the tobacco taxes smoothly in order not to
generate a drop in consumption (Bosson, 2002).
Exact predictions for the financial impacts are difficult to be analyzed. Ulrike
Günzel calculated that one package of cigarettes costs the government and
the society about 40 Euros (6,43 Euros governmental costs, 33,56 Euros
private costs). In her calculations she paid attention to the reduced span of
life time which causes less productivity, on the other hand she included as
well the reduction of pension assets. Only the wage continuation in case of
illness, cost the government 1,40 Euros per package of cigarettes (Günzel,
Tagesspiegel: Verbranntes Geld, 2007) .The amount of packages of
cigarettes consumed per year multiplied with the governmental costs makes
therefore almost 30bn. Euros which is more than the double of the tax
revenue.

8.3 Who bears the burden of the tobacco tax, consumers or producers?
At first sight, it seems that an increase of the tobacco tax affects only the
consumer. In fact, every tax raise reduces as well the sales numbers and
affects with that directly the producer. The cigarette industry does
compensate the market slump with more productive installations or
redundancies. Fortunately, other Industries do have enough potential to
employ that redundant workforce (DKZF, 2005b).
9 German economic and influences of bordering countries
9.1 Cigarette price differences between European countries
A very interesting and remarkable phenomenon is the enormous price range
of cigarettes in different European countries. The German cigarette
association (DZV) presented 2010 a study which is called MPPC (Most
Popular Price Category (DZV, 2010). Prices of a package of twenty Marlboro
cigarettes have been analyzed. The most extreme price differences
compared to Germany can be noticed in several East European countries
like Poland -61%, Slovakia -57.5%, Hungary -54%, Slovenia -52%, Czech
Republic -47%, even Austria sells cigarettes 15% cheaper.
9.2 Economic damage of not in Germany taxed cigarettes
Since 2004 the German tobacco industry engaged the Ipsos institute for
doing an analysis of the number of untaxed cigarette packages in Germany
(Ipsos- Study). According to HWWI, 2009, about 23 bn. Cigarettes which
have not been taxed but consumed in Germany. This makes 20% of the total
cigarette consumption and generates at least 4bn Euros tax losses and
1,2bn Euros lack of economic benefit.

Figure 7: Market of tobacco products 2009 (Source: Destatis/ VdR / DZV)
The most relevant reason for this phenomenon is the high tax rate level in
Germany. The price elasticity of a product increases from that moment when
the consumer can get it for a lower price or compensate with another
product. Due to the differences of cigarette prices in Europe, as already
mentioned above, smuggling is getting attractive. Furthermore, the
consumer changes the product and therefore the shag consumption
increased a lot as well (see Figure 4). Even though the EU tried to get a
balanced price level for cigarette prices, it was not possible due to different
economic levels between the states (Bräuninger & Stiller, 2010).
market of tobacco products 2009
cigarettes taxed in germany 75%
cigars 3,2%
shag 21,1%
pipe tobacco 0,7%
cigarettes not taxed in germany 20,1%

10 Results
The imperceptibility which is the characteristic of an indirect tax like the
tobacco tax is no longer fulfilled. The consumer does realize the tax
increases. In fact, the comparison of the consumer price development for the
last decade which makes about 10% and the price increase for tobacco
products, about 57%, shows this tendency clearly.
The tax increase during the last decades have been counter- productive.
The number of sold cigarettes decreased remarkably, the price elasticity due
to tax increases reached critical values of -1 to -2.5 which means that
consumers react highly sensitive to every price increase. The consumption
of shag increased because of relatively low taxes compared to cigarettes.
Price increases for cigarettes and taxes during the last three years where
smoother, the elasticity is tending towards 0 which means inelasticity. A
saturation for the market of cigarettes, taxed in Germany, can be
recognized.
Figure 8: Decrease of cigarette consumption and increase of taxes
On the other hand a lack of tax income of about 4bn. Euros and 1,2b. Euros
of economic damage due to smuggling and not in Germany taxed cigarettes
can be recognized. This reaction is the result of a huge difference between
cigarette prices in other European countries. Furthermore, the biggest ratio
of smokers is between 19 and 29 years old. The number of people who get
serious illnesses is increasing, diseases due to passive smoking should not
be underestimated.
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
2002
2003
2004
2005
2006
2007
2008
2009
percentage of taxes increase (government)
percentage increase of industrial price / cigarette
percentage of reduced cigarette consumption

11 Conclusion
Increasing the tobacco taxes for receiving higher revenues, we can at least
say, makes only sense when the prices for cigarettes in Europe get adapted.
Tobacco smuggling needs to be proven and punished harder. The frequency
and amount of tax increases should not be too high otherwise the
consumers will change products or stop smoking.
Tax increases with the intent to discourage smoking make sense when the
price for a package of cigarettes reaches a point at which especially young
people do not even start smoking. At the same time, as already mentioned,
the government should suppress smuggling best possible and a general
European price adaption would be essential.
12 The authors view
The author´s meaning correlates principally with the conclusion. Reducing
the tobacco consumption due to the general health of the German
population should be the primary aim. Also the enormous economic damage
because of absenteeism and untimely death needs to be decreased. From
the author’s point of view, the statement of a governmental dependency on
tax revenues is a fallacy. Even the estimations and calculations for the real
costs of a package of cigarettes are difficult, the financial impacts seems to
be higher than the revenues. Therefore the tobacco taxes should be
increased together with a European price adaption as well as stricter import
controls.

13 ITM Checklist
13.1 Strategic Management
For a cigarette producer, the long-term strategy can be the development of
new products which are not carcinogenic anymore. This strategy will be
helpful as well in case of a prohibition of carcinogenic products. It can be
assumed that the tobacco tax will increase for the next years. The industrial
part should be increased smoothly in order not to support the decrease of
consumption. It would make sense to analyze the entry into new markets.
The government needs to make the strategic decision if they would like to
keep the consumption stable due to the dependency of tax revenues, or if
they would like to improve the health of the citizen.
13.2 Marketing
For reducing the tobacco consumption, the government could initiate a
marketing campaign which shows the advantages of non-smoking.
An example could be to show the people what they could do with the money
they spend for cigarettes and the tax reduction which will result due to a
healthier society.
13.3 Financial Management
The government should strive for price adaption for tobacco products in all
European countries, which seems to be extremely difficult. The tax increase
of shag which has been too low should be adapted.
Due to the fact that the health costs are enormous due to tobacco
consumption, taxes have to be increased.
Tobacco companies have to improve their production and expand to other
countries for being independent of countries with stagnating markets.

13.4 Human resource management
The tobacco industry should engage development engineers which are able
to create healthier substitutes. The government should hire a marketing
group which is capable to design a new and attractive campaign as
mentioned in marketing (13.2).
Generally, healthier employees do have less absenteeism, the human
resource management is responsible for safety and wellbeing. Therefore
passive smoking should be avoided.
13.5 Business law
The tobacco law describes comprehensive bans on promoting tobacco
products. The government defines the tobacco taxes per cigarette or kilo
shag, the minimum retail price per cigarette and shag as well as the number
of units per package.
13.6 Research methods / management decision making
The current situation of increasing tobacco taxes and decreasing
consumption of cigarettes forces the management to make decisions for
new strategies in terms of products, markets.
13.7 Soft skills / leadership
The decrease of cigarette consumption has redundancies as a
consequence. In case of a certain situation the motivation of employees
especially in teams decreases. Exactly those changes are real challenges
for team leaders and require high leadership qualifications.

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Declaration
I hereby declare that I have produced this paper without assistance from any other
party and without the use of any unauthorized aids; and that all passages
reproduced verbatim, or nearly so, from any publications whatsoever have been
clearly identified as quotations and all relevant bibliographical references have been
provided. Furthermore, I declare that this paper has not been submitted to any
other examination board either in its present form or in any other similar version.
Munich, 09.01.2011

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