Taxation of the Tobacco Industry in Kenya – A Case for Excise Duty

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Taxation of the Tobacco Industry in Kenya – A Case for Excise Duty

According to the Global Adult Tobacco Survey 2014, the current smoking prevalence in Kenya is 15.1% among men and 0.8% among women with the national average of 7.8%. Daily cigarette smokers are 11.6% among men and 0.6% among women (GATS, 2014). With a 7.8% smoking prevalence, 42.927 million people and 58.1% of the total population aged 15 and over (United Nations, 2015), there are 1.95 million adult smokers in Kenya. The total market value of cigarette sales in Kenya was KShs. 34 billion for 7,403 million sticks in 2013 (Euromonitor, 2014). It means the number of cigarettes smoked per day per adult smokers was 9 sticks and the annual expenditure on cigarettes per adult smoker
was KShs. 17,477 or KShs. 48 per day per adult smoker. With per capita GDP of KShs. 124,468 as of 2014, this cigarette expenditure accounts for 14% of per capita GDP for a smoker. This percentage reflects that the opportunity cost of tobacco use (the household expenditure on tobacco products that could have
been allocated to an alternative use) is high.

Key Highlights

  • According to World Health Organisation (WHO), tobacco excise taxes (or other taxes uniquely applied to tobacco
    products) in nearly all countries account for less than 70 per cent of retail prices, with taxes in most countries accounting for less than half of retail prices. On average, at the global level, the share of total cigarette taxes in the price of cigarettes is about 50 per cent
  • Excise taxes remain the best alternative for goods that have to be taxed at relatively higher rates for one reason or the other. Indeed, countries that have implemented tax reform programs have made excise tax reform a
    major component of the overall reform package. In Kenya excise taxes have continued to play an important role in raising additional government revenue during the reform period.
  • Kenya places a lot of reliance on excise duty to raise government revenues. Excise duty is an internal
    tax imposed on goods produced or sold in a country, as opposed to customs duty that is imposed on imported goods.
  • Over time, excise duties have been employed for raising government tax revenues as well as to discourage the consumption or production of goods and services that are considered harmful socially, environmentally and to public health.
  • Excises are typically imposed in addition to another indirect tax such as a sales tax or value added
    tax (VAT). Examples of excise duties are taxes on fuels, and taxes on tobacco and alcohol (sometimes referred to as sin tax)
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    By | 2018-03-16T16:03:27+00:00 November 1st, 2015|IILA Publications, Policy Briefs, Tobacco Control|0 Comments

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