Why cigarette taxes must exceed Sh50 per pack – NTA report

The simulations are contained in the new report titled Tobacco Taxation and its Implications On UHC Financing In Kenya, launched by NTA in Nairobi.

In Summary

•The report looks at different scenarios, including an increase in tobacco excise tax on demand for tobacco products.

•The simulations indicated that for the excise revenue to increase from the base scenario of the tiered tax, the uniform specific tax rate must exceed about Sh 2,470 per 1,000 cigarettes.

A smoker puffs at a cigarette.
A smoker puffs at a cigarette.
Image: JACK OWUOR

The taxes on tobacco in Kenya are much lower than the optimum level possible, a simulation done by a local non-profit has demonstrated.

The simulations show that for the excise revenue to increase from the base scenario of the tiered tax, the uniform specific tax rate must exceed Sh2,470 per 1,000 cigarettes.

The National Taxpayers Association looked at various scenarios and found out that actually, any tax increase below that amount led to lower or just flat tax income for the government.

There was also a negligible effect on smoking rates.

The simulations are contained in the new report titled Tobacco Taxation and its Implications On UHC Financing In Kenya, launched by NTA in Nairobi.

“An increase in tobacco taxes should also reduce tobacco use as increased taxes are known to result in decreased tobacco use,” said Franciscah Marabu, the NTA programmes officer during the launch.

The report looks at different scenarios, including an increase in tobacco excise tax on demand for tobacco products.

It shows introducing a uniform tax rate of Sh2,446 per thousand cigarettes or approximately Sh50 per pack on the retail price of cigarettes, would only increase prices for the economy brand and reduce price for the middle and premium brands.

“The tax share in the retail price will remain about the same (at 35.5 percent). Sales volume (consumption) will reduce by 0.7 percent (or by 18.3 million packs). The smoking prevalence will move from 8.3 percent to 8.2 percent and the number of smokers will reduce only slightly (by 10,874),” the report says.

Marabu said these results are expected since the uniform tax of Sh2,446 increased the tax burden for the poorest consumers and reduced the burden for the premium segment of smokers.

The effect on excise tax revenue is startling. Excise tax is expected to decrease by 0.8 percent.

The simulations indicated that for the excise revenue to increase from the base scenario of the tiered tax, the uniform specific tax rate must exceed about Sh 2,470 per 1,000 cigarettes.

The report launched by the National Taxpayers Association.
The report launched by the National Taxpayers Association.

Other experts are also calling for higher taxes on tobacco and nicotine products.

In recent years innovation in the tobacco industry has led to an increased rise in the use of the e-cigarette. 

If the current budget 2022/2023 is passed, Treasury CS Yatani proposed to change the taxation regime for liquid nicotine from the current shillings per unit to an excise duty of Sh70 per millilitre.

This move will be made in order to curb the "easy availability" of liquid nicotine used in the devices to school-going children and the youth.

“Nicotine addiction is growing in Kenya and the use of these products leads to nicotine addiction and consequently smoking and use of other drugs," he said

"In financing, this kind of “science”, the industry’s motive is of course financial gain, power and influence and not the health of our young ones.”

Tobacco use remains the single largest preventable cause of disease, disability and death in the world.

In Kenya, it is responsible for the growing burden of non-communicable diseases such as cancer, diabetes, chronic lung diseases, and heart diseases.