Brand tax on tobacco won’t curb smoking

Cigarette smoking in Kenya is a major challenge affecting young and old. Despite smoking posing a serious health care risk to the user, it is also a serious healthcare risk to secondary smokers.

Recent Research by Global Adult Tobacco Survey (GATS, 2014) indicates a staggering 2.5 million people are using tobacco in Kenya. The study further showed that 0.7 million people are being exposed to tobacco at the workplace, 3.1 million exposed at home, 2.1 million at restaurants and 0.5 million exposed to tobacco smoke while visiting universities.

The best strategy for discouraging smoking is high taxation. Given the difficulty in controlling smoking, taxation becomes the most realistic way of reducing cigarette consumption.

According to the Framework convention on Tobacco Control, not only do effective tobacco taxes significantly reduce consumption and prevalence; the taxes are also an important source of revenue.

The decision by Parliament to pass the Excise Duty Bill that, among other things, proposes cigarette taxation to be based on brands as opposed to a uniform rate for all the brands, is misconceived as it is unlikely to change cigarette consumption or smoking habits. This why:

For a start, cigarette taxation is meant to discourage consumption, which is precisely why stakeholders always push the government to increase taxation.

Taxation based on brand as opposed to uniform tax only elevates certain brands in terms of cost, thereby pushing consumers to opt for cheaper brands.

This in itself does not discourage smoking but instead pushes smokers to brands that are not heavily taxed.

According to the World Health Organisation (WHO), there is no empirical evidence to support the efficacy of brand taxation as a strategy to combat excessive smoking. What is required is a tax regime that makes it costly to buy cigarettes.

According to WHO, the real average price of cigarettes has been falling and the economy is growing, resulting in greater affordability of cigarettes and higher per capita consumption in Kenya over time.

Despite the 48 per cent of tax in the retail price of cigarettes, the system has failed to raise the price of cigarettes sufficiently to arrest the growing trend in consumption. In addition, with the ad valorem tax system, which implies taxation based on value, the government cannot generate much revenue from low price levels. It is recommended that a uniform specific tax is imposed over and above the ad valorem tax with a specific floor.

If Kenya is serious about tobacco and health issues, it is important that a progressive tax regime be adopted and effected at all costs. In comparison, the current tax regime, though not the best, is still much better than what Parliament has passed this year.

The health sector is already strained and what the government does not need right now are issues that increase vulnerability to illnesses such as those caused by smoking.

Revenue generated from the tobacco industry can be used to boost access to healthcare. That is not covered in this Bill. The President should send it back to Parliament for further scrutiny, to develop a more progressive tax regime.
Ms Kabaka is the communications officer, International Institute for Legislative Affairs (IILA).