Kenya tobacco taxes among lowest globally— World Bank consultant

Tobacco taxes in Kenya are so low that makers of cigarette and nicotine products appear to be on a continuous honeymoon, tax experts say.

Karambu Muthaura, a health taxes expert consultant for the World Bank, said the highest tax for cigarettes constitutes just 29.3 per cent of the retail price.

The World Health Organization recommends taxes should constitute at least 70 per cent of the retail price.

WHO's evidence shows taxing tobacco products is the most effective way to reduce consumption, thus reducing diseases such as cancer, diabetes and heart disease.

Karambu said although the price of cigarettes has been rising in Kenya, taxes were not the factor.

“The manufacturers have been increasing the prices to make more profits, but the message they pass to the public is that this has to do with the KRA [Kenya Revenue Authority],” she said.

Karambu spoke in Nairobi at a government and civil society forum organised by the National Taxpayers Association, a Nairobi-based governance think tank.

The World Bank consultant noted excise taxes form just 20 per cent of the price of the high-end cigarettes. Popular brands attract just 27 per cent tax.

“The cheapest brands, the ones without filters, carry the highest tax of 29.3 per cent. But even that is way below the best practice,” she said.

According to the WHO’s Framework Convention on Tobacco Control, which Kenya is a signatory to, tobacco taxation can prevent millions of smoking-attributable deaths throughout the world.

Karambu explained that Kenya has a tiered system where filtered and non-filtered cigarettes are taxed differently.

Prof Cyprian Mostert, the chief health economist at Aga Khan University's Brain & Mind Institute, faulted the tiered system.

 He said it enhances the affordability of some cigarettes, which smokers turn to when others become expensive.

“Kenya needs to be very aggressive in taxing tobacco products, just like Australia, which increased taxes back to back,” he said.

“The industry always claims they will close when taxes are increased. But South Africa has increased taxes by 100 per cent but the industry did not run away,” he said.

The Cigarette Tax Scorecard 2020 by Tobacconomics, a research programme at the University of Illinois, shows Kenya has one of the world's most industry-favourable tobacco taxes.

According to the Ministry of Health, tobacco use kills at least 79 men and 37 women every week in Kenya.

More than 220,000 children and more than 2,737,000 adults continue to use tobacco each day, the ministry says.

The industry has also introduced new addictive products such as nicotine pouches and e-cigarettes, which are proven to harm the brains of children and adolescents.

NTA chief executive Irene Otieno said low tobacco taxes cost the government money that could fund health services, including employing more doctors.

“We are coming to offer solutions. Our solution is we support generation of taxes from harmful products like tobacco and nicotine. Those taxes can finance government projects and correct health challenges caused by tobacco,” she said.

National coordinator of the Kenya Tobacco Control Alliance  Thomas Lindi said the most pressing issues for the government include raising tobacco taxes, strengthening the tobacco control Act and introducing graphic warnings.

“But usually the biggest challenge is implementing these policies,” he said.

However, the tobacco industry Kenya says increasing taxes prompt consumers to shift to illicit products which are cheaper and widely available.

BAT recently said illicit cigarettes in Kenya stood at approximately 25.5 per cent of the total market as at the end of 2022, with majority being smuggled through the Uganda border.

“This represents an estimated annual loss in government revenues of over Sh6.5 billion. This trend suggests that steep excise increments do not lead to additional revenues, rather, they force consumer migration to illicit tax-evaded products,” BAT said last year.

However, WHO in a statement said that illicit trade can be successfully addressed even when tobacco taxes and prices are raised, resulting in increased tax revenues and reduced tobacco use.