EA states yet to raise taxes on tobacco as demanded by WHO

What you need to know:

The World Health Organisation (WHO), in 2010, released a technical manual on tobacco tax administration, that recommended that member countries increase excise tax charged on cigarettes to at least 70 per cent of the retail price of a packet.
Smoking still remains a major challenge for both developed and developing countries despite concerted efforts by WHO to combat it.

East African Community states are yet to raise tobacco taxes to levels recommended by the World Health Organisation, despite making commitments to help the United Nations combat smoking.

In its effort to control tobacco use, the WHO, in 2010, released a technical manual on tobacco tax administration, that recommended that member countries increase excise tax charged on cigarettes to at least 70 per cent of the retail price of a packet.

The UN organisation published the manual after numerous studies identified tobacco use as the single largest cause of preventable death globally.

The manual was to help governments maximise the benefits they can receive, with respect to public health and public revenues, from higher tobacco taxes by identifying a set of best practices.

The anti-tobacco lobbyists led by the International Institute for Legislative Affairs, (IILA) now want member countries to adopt the recommendations of the UN organisation to control the increase in tobacco smoking among adolescents and young adults in the region.

“Tobacco and cigarette smoking remain a big and increasing problem in the region. Smoking prevalence among youth is high and increasing,” said Vincent Kimosop, chief executive officer of IILA.

Though there are no official figures on the total number of smokers in East Africa, the anti-tobacco lobbyists believe the number is on the rise, mainly among the youth.

According to WHO figures, Rwanda has the highest excise tax on cigarettes comprising 50 per cent of the total retail price of a packet, followed by Burundi (39 per cent), Kenya (35 per cent), Uganda (25 per cent) and Tanzania (11 per cent).

There are a variety of taxes applied to tobacco products, among them excise (both specific and ad valorem), Customs duties, value added taxes, general sales or consumption taxes, and special levies that fund particular programmes.

READ: Uganda tobacco firms hit by new tax

However, WHO views excise taxes as the most important when considering health objectives, since they normally raise the price of tobacco products relative to the prices of other goods and services.

When considering the total tax share (excise tax and other charges) of the retail price per packet on selected popular brands, Rwanda’s figure rises to about 58 per cent, followed by Burundi (52 per cent), Kenya (49 per cent), and Uganda (40 per cent).

Popular brands are cheapest in Tanzania, with total charges comprising only 29 per cent of the overall price. Sudan, however, has the highest excise tax on tobacco (69 per cent), while total duties charged per packet comprise about 70 per cent of the price.

Smoking still remains a major challenge for both developed and developing countries despite concerted efforts by WHO to combat it.

In Africa, tobacco is a major contributor to the continent’s high disease burden. In adults, for example, cigarette smoking causes heart disease and stroke. Studies have also shown that early signs of these diseases can be found in adolescents who smoke.

“The most effective policy for reducing tobacco consumption is to increase the price of tobacco products through taxes. Higher tobacco prices reduce the quantity of tobacco consumed among continuing users. Higher taxes are particularly effective in reducing smoking among vulnerable populations such as the youth, pregnant women and low-income smokers,” said Mr Kimosop.

In Kenya, for example, section 12 of the Tobacco Control Act, 2007, gives the finance minister the powers to “implement tax and price policies on tobacco and tobacco products so as to contribute to the objects of the Act,” which are to protect the health of Kenyans.

The anti-tobacco lobbyists accuse the finance ministers in the region of not using their powers decisively to ensure taxes on tobacco products are increased as per WHO recommendations.

However, not all are in agreement with WHO on tobacco tax. The International Tax and Investment Centre, say WHO’s recommendations do not represent “best practice” in fiscal policy, adding that if implemented, they would undermine both national fiscal sovereignty and most governments’ objectives with regard to both tax revenues and public health.

The organisation also says that the proposals undermine the sovereign rights of countries to determine how their tax revenues should be allocated.

“Excise tax incidence as the basis for setting tax policy is flawed. There is no correlation between excise tax incidence and the excise tax yield, retail price or affordability of cigarettes.

Excise incidence therefore does not provide a sound foundation for achieving government aims of either raising revenue or reducing smoking prevalence,” the organisation says in one of its reports.

However, Mr Kimosop defends WHO, saying the proposals have succeed in controlling smoking in some developed countries.

The lobbyists also want the EAC to act on the illicit trade in tobacco products, saying it is undermining efforts to control smoking in the region.

Research done by IILA shows that between 2009 and 2013, over 47.7 million counterfeit cigarette sticks valued at Ksh 239 million ($2.7 million) and lost tax revenues estimated at Ksh152 million ($1.7 million) were seized by the Kenya Revenue Authority, Anti-Counterfeit Agency and the Kenya Bureau of Standards.

The institute said the EAC states are still facing challenges combating illicit trade in tobacco products because member countries are at different stages of legislating and implementing laws on the trade.

“To help curb cross-border smuggling, there is a need for harmonisation of tobacco taxes in the EAC region. Substantial differentials exist in cigarette prices, providing an obvious incentive for smugglers,” said Mr Kimosop.

The anti-tobacco lobbyists said international experience has revealed the importance of regional collaboration, political will, punitive fines, strong law enforcement, adequate prosecutorial powers and increased resources for agencies fighting the illicit trade in tobacco products.

“Licensing of supply chain, for instance, was found to be an effective enforcement mechanism in combating illicit trade in tobacco products in Canada and the US,” Mr Kimosop said.