TAX ADJUSTMENT PROPOSAL FOR THE FINANCIAL YEAR 2018/2019
REINTRODUCTION OF A FLAT EXCISE TAX RATE FOR TOBACCO
PRODUCTS IN KENYA
(Effective Implementation of Article 6 of the WHOFCTC and Its Guidelines)
PROMOTING PUBLIC HEALTH AND INCREASING GOVERNMENT REVENUE
(A win-win policy action)
THE NATIONAL TREASURY
THE PROBLEM AND RECOMMENDATIONS IN BRIEF
The Cabinet Secretary for Treasury, in his budget speech for FY 2017/18 introduced a two-tier tax structure of Ksh 2,500 per mille for cigarette with filters and Ksh 1,800 per mille for plain cigarettes. This was a shift from the specific tax rate for all cigarettes set at Ksh. 2,500 per mille, previously effected in the FY 2015/16. The changes have resulted in the following:
- Tobacco Industry have manipulated the tax system, by introducing non-filter cigarettes to avoid the higher tax tier (i.e. Ksh. 2,500)
- Lost government revenue
- Non-filter cigarettes increase amount of tar consumed per breath hence more harmful
- Whereas nominal prices of cigarettes has remained constant, real prices have shrunk contributing to affordability of cigarettes.
- Tobacco tax administration difficulties reported by Kenya Revenue Authority
- According to the Ministry of Health, in 2017, Non-Communicable Diseases (NCDs) accounted for over 50% of bed occupancy in government hospitals. Tobacco use is the predominant risk factor for the major NCDs in Kenya.
- Simplification of tobacco tax structure by re-introduction of a uniform specific tax rate for all cigarettes.
- Increase of the flat tax rate from Ksh. 2,500 per mille to Ksh. 3,100 per mille of cigarettes
Read full submission here: http://ilakenya.org/wp-content/uploads/2018/03/ILA-Tobacco-Tax-Proposals-FY-2018-19-1.pdf