Tobacco taxes not high enough, State told

Health experts, tobacco control advocates and national development policy specialists in Kenya have renewed their demands on the taxation of cigarettes.

They are basing their arguments on the recent tax announcements in the 2023/24 financial year budget which did not adjust the excise duty on cigarettes upwards, despite proposals.

And for the first time in about a decade, the government spared the main targeted excisable goods – alcohol, cigarettes and nicotine products – from tax hikes as the government shifted focus to other areas to raise revenue.

A study by the National Taxpayers Association (NTA) of 2019: Alignment of tobacco tax to the overriding objectives of the Tobacco Control Act, 2007, WHO’s Framework Convention on Tobacco Control )WHO- FCTC), 2005, proposed to the government to increase the excise duty applicable to cigarettes and to apply a uniform rate.

However, Kenya applies a specific differential or two-tier approach to taxing cigarettes with products that do not have filters attracting lower excise duty than those with filters.

“This two-tier approach falls short of the recommended WHO best practices for tobacco taxation,” the study concludes.

Irene Otieno, the Chief Executive Officer of NTA, says despite efforts to control tobacco consumption in Kenya over the last decade, it is estimated that over 2.5 million adults use tobacco products.

“Cigarettes are the most consumed,” she added. 

It is also estimated that five per cent of all deaths from non-communicable diseases in Kenya result from tobacco use, while 55 per cent of all deaths from cancers of the trachea, bronchitis and lung are attributable to tobacco.

Otieno said to control rising tobacco consumption, there is a need for aggressive taxation on the products.

“We are lobbying to have the tax on tobacco move to 70 per cent in line with global standards, but we have not achieved the desired goal yet,” she said.

Otieno said those advocating for punitive taxes on tobacco are also pushing to have a standardized tax system on these products after a study by the Brain and Mind Institute at the Aga Khan University, showed that the prevalence of e-cigarette consumption in Kenya is rising alarmingly at 5.8 per cent.

The tax on these products as described by the lead researcher Prof. Cyprian M. Mostert is too low to make a meaningful contribution to consumption.

“We are calling for a heavier tax on these commodities because it’s consumed by the wealthier group……

The study found out that the trading price of 50mg of Nicotine Liquid is equal to Sh1500, while on Nicotine, it is Sh70/mg, meaning that the tax per 50mg is Sh3,500 (50mg*70).

“Having analysed the prices and taxes, we concluded that the product is illicit, and Nicotine pouches are mainly sold in convenience stores and are used by children and youth,” he said when he made the presentation at a recent conference at the Aga Khan University themed: Tobacco Tax Reforms for Optimal Health and Socio-economic Benefits.

The trading Price of 10mg of Nicotine pouches retailed at Sh350, while the tax on the Nicotine pouches was at Sh1, 595/kg (1.595/g), meaning that the tax per 10mg Sh2 cents (1595/1000,000*10 =0.01595), which really doesn’t make sense according to Prof. Mostert.

“E-cigarettes and Vape are consumed by middle and high-income households, while the tax on nicotine pouches is minimal,” he said, noting that evidence shows that the trade and tax imbalances, that these products are traded illicitly.

The study findings also show that most of the products are traded online, making it difficult for enforcement.

“The vaping tax regime in Kenya is not effective because it is not designed to avert consumption. It’s too low,” he stated, saying there is evidence of underage consumption.

The study - which found out that an alarming, 53 per cent of the total consumers are in the ‘Generation Z’ age group bracket and 44 per cent are millennials – recommends aggressive taxation; a track and trace system to be expanded to cover E-Cigarette products to minimise illicit trade, build the capacity of Tax Revenue Authority to monitor online trade.

“We are also advocating for tailor-made messaging directed at the Middle-class to caution about the dangers of e-cigarettes, and schools need to play a more active role in screening for the consumption of these products,” he said.

Generation Z comprises people born between 1997 and 2012 (ages 11 – 26 years) while millennials are those born between 1981 and 1996 (ages 27 to 42).

“Interestingly, 66 per cent of the respondents have a Bachelor’s degree and 54 per cent have high gross income while 71 per cent live in large cities and aspire to be successful,” said Mostert.

An estimated 11 men are dying every day, while five of their female counterparts perish within the same period due to tobacco-related illnesses in Kenya, according to the World Health Organisation (WHO), findings backed by other research outcomes.

Last year, WHO revealed that about 79 men die weekly, while 37 women fatalities were recorded in the same period. Previously WHO has called on governments to implement Article 6 of the WHO Framework Convention on Tobacco Control (WHO- FCTC) on raising taxes on tobacco and its products to make it expensive to buy.

More than 6,000 Kenyans die of tobacco-related diseases every year - 79 men and 37 women die per week. An estimated 220,000 children and 2,737,000 adults use tobacco each day in the country,” the WHO said in March 2022. The UN health agency emphasized that tobacco kills more than 8 million people around the world every year, and over one million of those deaths are attributed to exposure to second-hand smoke.

“The Parties recognize that price and tax measures are an effective and important means of reducing tobacco consumption by various segments of the population, in particular young persons,” Article 6 (1) in Part III: measures relating to the reduction of demand for tobacco states.

This means that raising taxes on tobacco products will lead to increases in their price, and in turn make it less affordable.

Data from Kenya Household Healthcare Expenditure and Utilization Survey (KHHEUS) 2018, shows that a household with a patient battling a chronic illness, slides into poverty of scale after disposing of property and other assets to offset hospital bills.

“Overall, having a chronic disease member increases the likelihood of household incurring Catastrophic Health Expenditure (CHE) by 2.2 percent,” the survey indicates and concluded that chronic illnesses expose households to the negative effects of out-of-pocket health spending such catastrophic expenditure which limit spending on other basic necessities

Kenya is a signatory to the WHO- FCTC, is instrumental in taxes on tobacco, and calls for parties to improve tobacco tax policy over time, and adopt stronger tax measures, despite industry opposition and threats about illicit trade.

“Parties should implement FCTC Article 5.3 and ratify the Protocol to Eliminate Illicit Trade in Tobacco Products,” the experts call.

A raft of personalities who have intensified pressure on the government to speak out strongly against the spiralling use of tobacco and its products, especially novel nicotine-based, are arguing in favour of promotion of good health and increased revenue for development. All this is in the face of dwindling donor participation in Kenya’s economic development agenda.

Peter Kubebea, the National Taxpayers Association (NTA) Board Chair said the fatalities from cigarette-induced illnesses are unacceptable and calls for an immediate review of the current taxes on tobacco and excise duty on cigarettes.

Speaking at a recent conference in Nairobi, he observed that despite the progress made in global recognition of the importance of tobacco control in the development agenda and to the protection of public health, new tobacco control challenges constantly arise. He noted that such challenges include but are not limited to tobacco industry interference.

In this regard, he suggested that there’s a need for continuous review of the laws and regulations, specifically on tobacco control, that will ensure a progressive improvement of the existing pieces of legislation.

“Tax reform remains key in strengthening policy measures that can concurrently save millions of lives, reduce poverty, and increase countries’ domestic resources for financing development,” he said during the conference themed: Tobacco Tax Reforms for Optimal Health and Socio-economic Benefits.

Furthermore, he noted, increased tax in tobacco control offers a double solution, cessation of tobacco consumption resulting from unaffordability and higher revenue to the government.

Dr. Elizabeth Wangia, acting director of health financing at the Ministry of Health argues that to sustain the health sector delivery of services in the wake of scaled-down donor money, there is need to be innovative and even come up with “Sin taxes” on suspected harmful products, mostly cigarettes and alcohol.

“As we drafted a transition plan following the announcement by donors of their intention to scale down, or at some point withdraw financing Kenya’s health sector, we realized a gap of 94 per cent when we come to NCDs that form a huge burden of the country's disease burden,” she said, noting that this implied collecting more taxes and in this case on tobacco, to discourage products that contribute to the prevalence of NCDs.

She said the team working on the Transition Plan also learned that taxes on tobacco; whereas are not optimal, they are also underutilized.

Consecutive studies and analyses of the health sector in the country estimate that the government continues to spend billions of shillings in correcting the impact of tobacco use in the country.

In 2019, a study showed that the government used Sh15 billion to mop up the effects of tobacco abuse annually.

In the same year, WHO estimated that close to 8 billion cigarette sticks were being consumed in Kenya annually.

“This translates to a financial burden of approximately Sh40 billion, money that would have otherwise been used in providing essential services to Kenyans thereby improving their standards of living,” the WHO said, noting that the unnecessary expenditure on cigarette smoking and tobacco abuse is a precursor for disease and poverty among the Kenyan communities.

In the Kenya Demographic Health Survey (KDHS) 2022, one per cent of women and 11 per cent of men aged 15-49 use any type of tobacco. The budget to the health sector in the country suffered a decrease of Sh5.6 billion from Sh146.8 billion in the 2022-23 financial year to Sh141.2 billion in the current 2023-24 fiscal year.

The World Bank in a technical report of its global tobacco control program: Tobacco Tax Reform at the Crossroads of Health and Development reminded policymakers of a policy measure that can simultaneously save millions of lives, reduce poverty, and increase countries’ domestic resources for financing development.