- Kenya’s tobacco tariffs, as a percentage of the retail price, are 46.12 per cent, 29 per cent less than the global average.
- Experts have also questioned Kenya’s decision to exclude tobacco products from the tax revisions in the Finance Act 2023.
- Lobby insists that taxation on tobacco and nicotine products should continue annually, with the inflation factor strictly embedded in the policy adjustments.
Kenya’s National Taxpayers Association asserts that the country’s current tobacco taxes fall significantly below the World Health Organization’s recommended baseline, which advocates for taxes to be at least 75 per cent of the product’s retail price.
This is despite the acknowledgement that taxes represent the most cost-effective means to reduce tobacco consumption, particularly among youth and low-income groups, thereby lowering the country’s burgeoning healthcare costs associated with treating tobacco-related diseases.
According to the lobby and the Research Unit on the Economics of Excisable Products (REEP), Kenya’s tobacco tax as a percentage of the retail price is 46.12 per cent, 29 per cent less than the global average.
Based on the price analysis per pack of 20 cigarettes, the report exposes Kenya’s current tax structure inadequately.
It also questions the policymakers’ decision to exclude tobacco products from the Finance Act 2023 tax revisions, suggesting that this move will not achieve its goal of decreasing the products’ affordability and discouraging consumption.
The report highlights Kenya’s affordability percentage of GDP per capita required to purchase 2,000 cigarettes of the most sold brand, which averaged 11.4 per cent last year.
Read also: How Heavy Taxation, Illicit Trade Killing Kenyan Industries
Global tobacco tariffs
Data from the WHO reveals that the rate has been steadily increasing since 2018, rising from 6.8 per cent to 11.4 per cent in 2020, underscoring the need for further taxes to reduce affordability.
“A tax increase that raises tobacco prices by 10 per cent decreases tobacco consumption by about 4 per cent in high-income countries and about 5 per cent in low- and middle-income countries such as Kenya,” states the WHO.
As of 2020, the affordability rates in global benchmarks like Bosnia, Israel, and Slovakia, with tobacco taxes as a proportion of retail prices exceeding 75 per cent, are 6.09 per cent, 2.36 per cent, and 2.14 per cent, respectively.
Joel Gitali, chairman of the Kenya Tobacco Control Alliance, agreed with the findings, stating that Kenya’s tax system is currently “tobacco industry-friendly” and exceptionally low.
“It’s not contributing significantly, which is one of the reasons tobacco corporations continue to make substantial profits. Due to significant influence from the tobacco business, the country’s current tax rate is considerably below the WHO’s recommended level, ranking poorly on the international scale,” he says.
Therefore, he insists that taxation on tobacco and nicotine products should be annual, with the inflation factor strictly integrated into the policy adjustments. Gitali emphasizes that, due to inflation effects, the products become more affordable if taxation remains unchanged.
Read also: Tanzania Looks to Boost Tobacco Sector
Kenya’s tax policies on tobacco
“Kenya once boasted the best tax policies on tobacco products globally, with other countries benchmarking the Trace and Track system. However, we have now experienced significant setbacks, and our neighbors, especially Uganda and Ethiopia, are surpassing us. These nations have implemented stronger tobacco control laws, including the prohibition of e-cigarettes and oral nicotine pouches.”
Nevertheless, the WHO notes that high tobacco taxes are rarely implemented globally. “Only 41 countries, representing 12 per cent of the world’s population, have introduced taxes on tobacco products to ensure that at least 75 per cent of the retail price is taxed,” it states.
The WHO also highlights the challenge posed by the growing illegal tobacco trade, making it difficult to reduce consumption rates by lowering costs. It estimates that one in ten cigarettes and tobacco products used worldwide is produced illegally.
British American Tobacco (BAT) Kenya points out that the cumulative increment in tobacco excise tax in Kenya, exceeding 50 per cent since 2019 amid challenging economic times, has led consumers to shift to illicit products that are cheaper and more widely available.
According to BAT, the majority of illicit cigarettes in Kenya as of 2022 were trafficked via the Ugandan border, constituting approximately 25.5 per cent of the country’s entire market.
BAT states that this results in an approximate yearly loss of over US$40.9 million (Sh6.5 billion) in government revenue. According to BAT, the trend indicates that steep excise increments do not lead to additional revenues but rather force consumers to migrate to illicit products that evade taxes.
However, the WHO counters in a statement that experience from numerous nations shows that, even with higher tobacco taxes and prices, illicit trade can be effectively controlled, resulting in higher tax collections and lower tobacco usage.
Read also: Kenya’s fight against tobacco
