LEGAL CORNER

Tobacco, cancer and tax

The world is fighting against tobacco use to control the cancer scourge

In Summary

• Tobacco tax structure should align with the WHO recommendations

• Tobacco industry should be kept off the administration of tax policies

Tobacco and cancer
Tobacco and cancer
Image: COURTESY

‘I Am and I Will’ was the theme for this year's World Cancer Day, which was marked on February 4. This theme intended to highlight the efforts of every person fighting against the disease globally, and this includes people trying to quit their smoking habits.

With every inhalation of tobacco smoke, smokers expose those close to them, including their loved ones, to dangerous chemicals that have the potential to damage their bodies and result in life-threatening diseases, such as cancer.

In 2018, the World Health Organisation estimated that cancer caused about 9.6 million deaths, and 70 per cent of these deaths occurred in low- and middle-income countries, 230,968 occurring in Eastern Africa. Lung cancer contributed to 1.76 million deaths and 12.3 per cent of the total numbers of newly diagnosed cases. Among the different risk factors associated with causing cancer, tobacco use ranked the highest, being held responsible for about 22 per cent of cancer- related deaths in the world.

Tobacco use is the leading cause of non-communicable diseases in the world, and it also causes a significant economic burden on society both directly and indirectly. Directly to the extent that it increases health costs associated with tobacco-related diseases and indirectly by causing premature deaths. WHO estimates that by reducing or eliminating the use of tobacco, cancer cases can be reduced nearly by half. In this regard, it calls upon member states to strive to cut tobacco prevalence by 30 per cent by 2025.

This initiative would aid the progressive realisation of Sustainable Development Goals (SDG) 3.4 — to reduce by one-third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being and ideally SDG 3.a to strengthen the implementation of the WHO Framework Convention on Tobacco Control in all countries, as appropriate. How then can the world reduce the consumption of tobacco?

Increasing tobacco excise tax is the single most effective way to encourage tobacco users to quit and to prevent young people from starting to smoke. But even so, the intended impact of increasing such taxes is blunted by, among other reasons, assimilation of complicated tax structures in policies by governments. To understand this, it is imperative to understand the types of taxes systems used on tobacco products- specific excise taxes and ad valorem excise taxes.

The specific excise taxes is either uniform or tiered. While uniform tax imposes a minimum price across all types of cigarettes, meaning, high priced and low priced brands of cigarettes all have a uniform price, tiered taxes impose different taxes on different brands. Ad valorem excise tax, on the other hand, is expressed as a percentage of a certain base value, say, the retail prices and it leads to a big difference in prices between lower and higher cigarette brands. As such, it increases incentives for consumers to switch to cheaper brands.

In Kenya, by virtue of section 26 of the Finance Act, 2019, cigarette tax structure is in two-tiers, of Sh3,157 per mille for a cigarette with filters and Sh2,272 per mille for plain cigarettes (without filters), amounting to approximately 15 per cent increase or approximately Sh8 for filtered cigarettes and Sh6 for non-filtered. This is a great achievement in the journey towards the WHOs recommendation of 70 per cent retail price of tobacco products being excise tax.

As expected, the new rates have resulted in an increase in the price of some tobacco products with varying impact. On one hand, a leading cigarette manufacturer has raised the prices of most of its products by up to Sh15 per packet. This is almost twice the real increase occasioned by the tax. In addition, the price increase of premium cigarettes is larger than that of cheap cigarettes. Clearly the company is seeking to reap additional profits from higher-end brands while keeping market shares for cheap cigarettes bypassing the tax fully for premium brands and partially for cheap brands. A second company chose to retain its prices in spite of the tax increase, a typical response to enable it to retain a higher market share amongst cheap cigarettes.

These reactions by the tobacco industry are worrying; the impact will be that consumers will switch from the high-end brands to the cheaper brands and the companies will retain their profits. KRA is unlikely to see a significant increase in tax revenues this year and Public health benefit of reduced consumption will be defeated. Tobacco-related cancers and other non- communicable diseases will continue to ravage our population.

As the world continues to fight against tobacco use to control the cancer scourge, Kenya should consider revising her tobacco tax structure to align with the WHO recommendations and to mitigate possible interference by the tobacco industry in the administration of tax policies.