A study by the Institute of Statistical, Social and Economic Research (ISSER), has stated that if the government levies excise tax as a specific tax on tobacco products, it would significantly improve the fiscal and public health effects in Ghana.
The study which was on Fiscal and Public Health Impact of a Change in Tobacco Excise Taxes in Ghana, was carried out by Mr Christian K. Osei and Ms Ama Fenny (PhD) of ISSER – University of Ghana and presented at a National Stakeholders Meeting on Tobacco Taxation in Ghana.
According to the lead researcher, Dr Ama Fenny, although Ghana imposes the highest Ad-valorem tax rate of 175 per cent in the sub-region, it is burdened with consequential challenges such as: susceptibility to under-valuation of tobacco products and encouraging ‘Trading Down’ effect in favour of cheaper cigarettes, thereby reducing the health benefits.
The study pointed out that in the developed economies, tobacco was less affordable over time due to increase in taxes, while in the developing economies, including Ghana, tobacco products are more affordable with minimal change in taxes.
The study noted that by 2030, more than 80 per cent of tobacco-related diseases would be from low and middle-come countries. It further disclosed that every year, more than 5,000 people in Ghana are killed by tobacco-related diseases, adding that 75 men and 21 women die weekly as a result of tobacco use according to Tobacco Atlas (2018).
The ECOWAS Directive
The study stated that Article six (6) of recent ECOWAS directive on tobacco control in the sub-region requires member States to subject tobacco products to an excise duty, which must include an Ad-valorem duty and a specific duty.
“The National Cancer Institute and the World Health Organisation (WHO) show that minimum uniform specific excise tax is required. However, if a country is already implementing an Ad-valorem system, then the country may add a uniform specific element to it, as these systems have considerable advantages over purely Ad-valorem system (IARC, 2011; NCI and WHO, 2017).”
ISSER Research
However, the study indicated that since the specific tax would be eroded by inflation, “the Ministry of Finance should regularly adjust the nominal excise tax by the inflation rate and the economic growth rate over time to ensure the product did not become more affordable.”
The study further asserted that effective implementation of the specific mixed tax system required strong tax administration, political-will with technical capacity.
However, now that the government needs more revenue to finance its budget, a specific tax together with an Ad-valorem is expected to earn more revenue for the state and subsequently discourage the consumption of tobacco products. This will eventually reduce the diseases and complications associated with the use of tobacco products.
The National Stakeholders Meeting was organized by the Vision for Alternative Development (VALD), a civil society organization, in collaboration with the Ghana Revenue Authority in Accra.
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