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Ideas & Debate

Why taxes on tobacco products need a relook

Tobacco
Tobacco taxation is one of the major avenues that the government should use to fund the 2019/2020 proposed budget of Sh2.8 trillion. FILE PHOTO | NMG 

Consumption of tobacco products is a leading contributor of non-communicable diseases like cancer, which pose a great social and economic burden to the economy.

The WHO Framework Convention on Tobacco Control (FCTC) recommends price and tax measures as the most effective way of reducing demand and consumption of tobacco products by various segments of the population, in particular young persons.

It proposes a 70 per cent tax rate on retail price of tobacco products. Increasing tobacco taxes by 10 per cent in high income countries reduces consumption by 3-5 per cent and is more likely to be higher in low and middle-income countries.

Even though Kenya has made strides in increasing taxes on tobacco products, currently standing at 52 per cent, there is still need to push for increased taxes due to inflation, the negative health impacts and the burden that such products pose on the national health budget.

HEALTH SECTOR

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The 2019/2020 budget estimates are at Sh2.8 trillion, with the health sector being allocated Sh93 billion. This is meant to fund two major projects: provision of the universal health coverage (UHC), and expansion of the health infrastructure nationally.

While counties are just about to roll out the UHC, it is impossible to ignore the fact that non-communicable diseases pose a major burden in the health sector.

Tobacco taxation has huge potential benefits when implemented effectively; by both restoring a nation’s health status as well as raising revenue to finance the national budget.

REDUCE DEMAND

It should be noted clearly that unlike other products, taxing tobacco products is not only for revenue collection but also the need to reduce their demand and consumption since they are a major cause of heart disease and lung cancer. Tobacco taxation is one of the major avenues that the government should use to fund the 2019/2020 proposed budget of Sh2.8 trillion.

Additionally the government should consider going back to the one-tiered system of taxing cigarettes as research proves that it is more effective in reducing consumption unlike the existing two-tiered one, which is a bit complex.

Ms Ngayi is Project Assistant at National Taxpayers Association.

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