By OMBOKI MONAYO
A new taxation schedule affecting alcohol, tobacco and nicotine products is set to make Kenya move towards a healthier future.
The Kenya Revenue Authority (KRA) announced the new taxation schedule for the products last month.
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This significant change followed President William Ruto’s endorsement of the Excise Duty Act (Cap. 472), which has adjusted excise duty rates on various products, particularly filtered tobacco cigarettes and inhalation nicotine substitutes.
The implications of this notice are profound.
Manufacturers and suppliers of these products will now face increased excise duty rates.
This shift is part of a broader strategy aimed at reducing tobacco consumption while simultaneously enhancing government revenue.
From December 27, 2024, the excise duty on filtered cigarettes will rise to KES 4,100 per mille—a modest increase of 0.81% from the previous rate of KES 4,067.03 per mille.
For context, a mille refers to a supply unit comprising 1,000 cigarette sticks.
Nicotine substitutes such as vapes, pens, Snus, and e-cigarettes will see their excise duty jump from KES 1,594 to KES 2,000 per kilogram—a staggering 25% increase.
Furthermore, liquid nicotine for electronic cigarettes will experience a nearly 43% hike from KES 70 to KES 100 per millilitre.
This announcement signifies a crucial advancement in the ongoing battle against tobacco use in Kenya.
With approximately 12,000 deaths attributed to tobacco smoking each year—linked to chronic diseases like respiratory illnesses and cancers—the urgency for effective measures is clear.
A study revealed that between 2012 and 2021, there were over 60,000 deaths among adults aged 35 and older due to tobacco-related diseases, accounting for about 16.5% of total deaths studied.
In a January 12, 2024 press statement, the Ministry of Health warned Kenyans against using electronic cigarettes, nicotine pouches, vapes and related products due to the long-term risk of developing health complications.
Speaking in a worship service in Embu, Principal Secretary Mary Muthoni voiced the ministry’s concern with the youth-driven craze for non-combustible tobacco and nicotine products, saying they would adversely impact their health in the future.
“These new-generation tobacco and nicotine products are becoming a significant health risk. We must act now to protect future generations,” said the PS.
Her strongly worded sentiments may however ring hollow in the face of stark reality on the ground.
Kenyans can easily order the new-generation products on various websites online, or buy them in selected retail outlets, including malls and petrol stations along major highways.
To mitigate the extensive health and economic burdens posed by tobacco use, Kenya requires robust strategies to curb consumption.
What research says
Research suggests that a mere 10% increase in cigarette prices can lead to an approximate 8% decrease in demand, particularly among vulnerable groups such as youth and low-income individuals.
For nearly two decades, advocates for tobacco control in Kenya have been vocal in their efforts to combat the rising tide of tobacco consumption associated with severe health risks including throat and mouth cancers, diabetes, and hypertension.
On March 20, 2024, a coalition comprising the National Taxpayers Alliance (NTA), the International Institute of Legal Affairs (IILA), the Kenya Tobacco Control Alliance (KETCA), and Den of Hope called for increased taxation on tobacco products—deeming it essential for reducing their appeal.
Tax expert John Thomi underscored this sentiment when he stated, “Tobacco tax is a central factor in pricing and therefore can be used to reduce tobacco affordability through price increase.”
By making these products less affordable, the government aims to alleviate smoking-related health issues that burden the healthcare system.
The immediate consequence of the excise duty increase will be higher prices for tobacco products.
This could prompt some consumers to seek cheaper alternatives or even resort to illicit products.
Joel Gitali, chair of KETCA, welcomed the changes, saying, “The increase in taxation is expected to discourage consumption and promote healthier choices among the population.”
He is asking for further increases to get Kenya’s tax rates at at least 80% of the product retail price.
“An increase of between 70-75 % will put Kenya at par with World Health Organization’s recommended tax rate. We are however strongly advocating for an 80% tax hike,” he said.
Despite the country’s progress in taxation measures, concerns continue to persist that without effective public health campaigns accompanying these tax increases, many consumers may remain unaware of the health risks tied to tobacco use.
KRA’s adjustments reflect a commitment to public health and revenue generation but also raise critical questions about potential impacts on illicit trade.
As higher excise duties are implemented on tobacco products, fears grow regarding a corresponding rise in illegal trade—an issue that public health advocates and policymakers are keenly aware of.
While higher taxes typically deter legal purchases by raising prices, they may inadvertently push some consumers toward cheaper illicit alternatives.
Research indicates that these illicit products often evade health regulations and are more accessible to low-income populations and youth—compounding public health challenges.
KETCA has pointed out that “fears of increased illicit trade are often exaggerated by the tobacco industry as a means of stalling tax reforms.”
Mr Gitali further articulated this perspective during an interview with the Kisii Press Club: “The argument that higher taxes will lead to an increase in illicit trade is a tactic used by the tobacco industry to undermine public health initiatives.
Evidence shows that well-implemented tax policies can reduce smoking rates without significantly increasing illegal trade.”
The NTA echoed this sentiment by stating that “the economic argument against tobacco taxation is also undermined by the overwhelming health costs associated with tobacco use.”
Despite concerns about potential illicit trade growth, NTA remains confident that the overall health benefits derived from higher taxes will outweigh any negatives.
Empirical studies suggest that effective enforcement of tax policies can mitigate illicit trade risks through enhanced border controls and stricter penalties for illegal sales.
Such strategies have proven successful in other countries where well-implemented taxation policies have led to decreased consumption while generating revenue for public health initiatives.
By implementing increased tobacco taxes alongside effective public education campaigns, Kenya can deter users from purchasing these harmful products.
Striking a balance between tax policy and robust control measures is crucial for improving health outcomes and alleviating the economic burden posed by tobacco-related diseases on society.
