Kenya: Experts welcome move to tax nicotine pouchesACTA
In the budget statement on June 10, 2021, Cabinet Secretary for National Treasury Ukur Yatani noted that innovations in the tobacco industry have led to the introduction of new nicotine delivery products, such as Lyft.
Yatani said: “These new products do not fall in the classification of tobacco products existing in the Excise Duty Act and are therefore currently not subject to taxation.”
“In this regard, I propose to introduce excise duty on products containing nicotine or nicotine substitutes at a specific rate of Ksh 5.0 per gram. This rate of excise duty is equivalent to the duty applicable to similar products under the Act,” he added.
Health and legal experts working in tobacco control and legislation have praised this move to tax nicotine pouches.
According to the World Bank Group’s publication, E-Cigarettes: Use And Taxation (2019), regulating new nicotine delivery products using excise taxation and restrictions on access and sale is a widely-accepted policy action to prevent their harmful health effects.
Advocate under the Kenya Tobacco Control Alliance (KETCA) said the taxation was long overdue.
“It is a positive move given that the British American Tobacco (Kenya) was already fighting for tax relief on their nicotine pouches,” said KETCA national chairman Mr Joel Gitali.
In September 2020, former BAT East Africa managing director Beverley Spencer-Obatoyinbo said they had opened talks with the Treasury and the Kenya Revenue Authority (KRA) to have the pouches, initially exempted from excise duty for two to three years, and subsequently attract lower taxation than prevailing rates on cigarettes.
“My expectation is that there would be no exercise in this category due to the size of foreign direct investment. We are looking at a holiday of two-three years in order to start the manufacturing, distribution and sales of this category, and also give us a chance to establish exports,” Spencer-Obatoyinbo had said.
On Thursday, Gitali praised the government for rejecting this ill-timed proposal.
“That was very deceptive because the company was running away from its responsibility by seeking tax exemptions. We thank the government for listening to tobacco control advocates, who have been advocating for strict regulation and taxation of nicotine pouches. We have started on a good note and now we are looking forward to the taxes going higher. All these harmful and addictive products must be taxed accordingly,” Gitali said.
The World Health Organization (WHO) and the Secretariat of the Framework Convention on Tobacco Control (FCTC) have been clear in recommending that countries treat and regulate e-cigarettes and nicotine delivery products no differently than other tobacco products.
The International Institute for Legislative Affairs, a Nairobi-based legal thinktank that works closely with Parliament to develop laws, also praised the decision to tax nicotine pouches.
“We now appeal to Parliament to adopt the proposal, which has been included in the Finance Bill 2021. The Bill should be passed with this proposal intact,” said IILA Chief Executive Officer Celine Awuor.
“It is a good move to have taxes on nicotine products. We also ask that the taxes on all nicotine products to be equally high to prevent switching and dual use,” Ms Awuor said.
Celine noted if taxes of some products are lower, addicted users might seek to satisfy their addiction with alternatives rather than quitting.
KETCA National Coordinator Thomas Lindi said imposition of excise duty is evidence the products are harmful.
“Excise taxes are commonly employed to discourage certain harmful behaviors. They do this by decreasing both supply and demand for a product via price increases. We now ask the Ministry of Health to move in strongly and regulate this harmful product,” Lindi said.
He noted there is no evidence nicotine pouches are a safer alternative to smoking or help smokers to quit. They are also not approved by the Pharmacy and Poisons Board as a nicotine-replacement therapy.
Smokers who want to quit should seek medical help and will receive medically approved nicotine replacement therapy, for free in public hospitals, because it is covered by the National Hospital Insurance Fund.
According to the WHO’s Global Nicotine Reduction Strategy, nicotine exposure can harm brain development in ways that may affect the neurological development and mental health of children and adolescents. The harm is permanent.
“Early exposure to nicotine (i.e. before or during adolescence) is associated with more severe dependence, greater reward and increased self administration, suggesting that the developing brain may be more susceptible to permanent changes caused by nicotine that support addiction,” the WHO’s Global Nicotine Reduction Strategy notes.