Unify Tobacco Tax To Boost Revenue, Rotich Advised
June 26, 2019
Treasury has been asked to change the tax structure for tobacco products in Kenya to gain more revenue and reduce abuse.
Tax experts said the current tier system denies the government revenue.
The International Institute for Legislative Affairs, a Nairobi-based economic think-tank, yesterday said the excise duty Act of 2015 created a simplified tobacco tax structure where all tobacco products were charged the same rate of excise duty irrespective of brand or price.
"In the two years that the Excise Duty Act, 2015, was implemented, Kenya Revenue Authority reported included a drop of 17 per cent in consumption of cigarettes and an increase of revenue of approximately Sh3 billion (from Sh9 billion to Sh12 billion)," said IILA chief executive Emma Wanyonyi.
She said re-introduction of the tier system, with the latest rates being Sh2,630 and Sh1,893 per mille (thousand sticks) for cigarettes with filters and filter-less respectively, has made cigarettes cheaper and reduced revenue for the government.
"We, therefore, call for a re-thinking of the tax structure for tobacco products in Kenya. We specifically call for simplification of the tobacco tax structure by re-introducing uniform specific tax rate (single tier) for all cigarettes," she said.
In his budget statement mid this month, Treasury Cabinet secretary Henry Rotich increased excise duty for alcohol and cigarettes by 15 per cent.
This means a packet of 20 stick of cigarettes received an additional excise tax of Sh8 making the new rate Sh61.
This implies that a stick of a cigarette will likely cost Sh15 from the current Sh10. The move may curb the use of tobacco among the younger and older generations.
IILA said the increase was welcome but insisted the uniform tax rate was best for cigarettes.
The Kenya Tobacco Control Alliance, the umbrella body for Kenyan advocates, said the additional revenue from taxes should be directed toward tobacco control.
"It’s our hope and prayer that taxes collected will be put to the intended use. More resources should be directed towards tobacco control. The money should not go into lining individuals’ pockets," said Ketca chairman Joel Gitali.
He urged the government to seal the loopholes used by tobacco companies to evade and avoid remitting taxes.
IILA suggested that a portion of the tax revenue should fund programmes to reduce the health burden caused by tobacco use.
"Tobacco is a major risk factor of Non-Communicable Diseases and a leading cause of preventable death. Tax and price measures are considered to be one of the most effective tobacco control strategies due to the potential to discourage initiation, encourage quitting of tobacco use and generate much-needed revenue for governments," Emma said.