“Sin tax” on cigarettes proposed to cut smoking in Ethiopia

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A new draft law is being prepared by the Ministry of Finance and Economic Cooperation (MoFEC) to increase the price of tax on cigarettes by introducing a specific excise tax with the goal of reducing the amount of smokers in the country that now stands at five million.
The draft which received assistance from the World Bank Group (WBG) will soon be completed shortly and forward it to the Council of Ministers for ratification.
There is fear that the tax on cigarettes may fuel illicit trade causing contraband to come from neighboring countries.
Currently local cigarettes are sold at less than one USD per packet while the imported cigarettes are sold from two to three USD.
The percentage of the price increase remains confidential however a source form MoFEC told Capital that the increased price will be disclosed soon after the draft study is completed.
Asnakech Alemu, a non-communicable disease expert at the Food, Medicine and Health Care Administration and Control Authority of Ethiopia (FMHACA) told Capital that the price increase will help discourage smoking.
“For many years customers have not included taxation when buying cigarettes, the taxation is only implemented on the importing and production cost, but now MoFEC and WBG are working to increase the price system by introducing a specific excise tax.’’
“Taxation remains the most effective means of reducing the demand for tobacco products particularly among youth and the poor, and is an important strategy in tobacco control. Ethiopia levied ad valorem excise tax on tobacco products. This makes the product very affordable. In general, evidence suggests that specific taxes are more effective than ad valorem taxes in reducing consumption, particularly among those with limited budgets, such as youth,” she said.
Global research indicates that if a tax increase results in a 10 percent increase in cigarette prices, the number of smokers worldwide would decline by 42million (38 million in low- and middle-income countries and four million in high-income countries) saving 10 million lives. A 70 percent increase in the price of tobacco could prevent up to a quarter of all deaths caused by smoking worldwide. Youth and low-income people are much more sensitive to the price of goods than those with higher incomes. Almost all countries in Africa have some level of taxation on tobacco products.