BUSINESS

Lobby Groups Call for Unified Tobacco Tax System to Fight Illicit Trade

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The National Taxpayers Association (NTA) and the Kenya Tobacco and Nicotine Tax Coalition have renewed calls for East African countries to harmonise tobacco taxes, warning that widening differences in excise duties across the region are fuelling cigarette smuggling and undermining public health efforts in Kenya.

NTA chief executive officer Patrick Nyangweso said the current tax gaps between countries such as Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo are being exploited by traders who move cheaper cigarettes across borders and sell them in higher-tax markets. They argue that without a coordinated regional system, Kenya’s planned tax increases may not achieve their intended impact.

“Without regional tax harmonisation, illicit trade will continue to thrive because smugglers will always follow the lowest-tax route,” he said.

Tobacco Control (Amendment) Bill 2024

Kenya is currently reviewing major tobacco tax reforms under the Finance Bill 2026 and the Tobacco Control (Amendment) Bill 2024. The proposals have sparked debate between public health advocates who support higher taxes and industry players who warn that steep increases could fuel illicit trade.

The NTA is proposing an annual 30 per cent increase in excise duty on cigarettes from the current Sh4,100 per 1,000 cigarettes over the next five years. If adopted, the tax would rise to about Sh15,124 per mille by 2029. The association also wants automatic indexation of tobacco taxes to inflation and income growth, arguing that static tax systems lose value over time.

“Despite the 2024 uniform excise rate of Sh 4,100 per mille, the Tobacco Economics Scorecard fell to 1/5 in 2024, the lowest since 2018, reflecting the erosion from frozen inflation adjustments and inadequate tax share,” Nyangweso said.

Kenya’s tobacco taxation level currently stands at about 30.6 per cent of retail price, far below the World Health Organization recommendation of 75 per cent. Health experts argue that higher taxes remain one of the most effective ways to reduce smoking rates and discourage youth initiation.

According to the NTA, tobacco use is responsible for an estimated 12,000 deaths annually in Kenya and contributes significantly to rising cases of cancer, cardiovascular disease and chronic respiratory illnesses. The organisation also estimates that the economic burden ranges between $544.4 million (Sh70.5 billion) and $756.2 million (Sh97.9 billion) each year through healthcare costs, productivity losses and reduced household income.

Despite the public health concerns, tobacco farming continues to support livelihoods in parts of Migori, Homa Bay, Bungoma and Kisumu counties, creating a policy dilemma between economic survival and health protection.

The NTA is also pushing for stronger enforcement against illicit trade, including full rollout of the Excisable Goods Management System (EGMS) at all tobacco entry and manufacturing points, and the creation of a multi-agency enforcement team involving the Kenya Revenue Authority, police and the Anti-Counterfeit Authority.

The group is further urging Kenya and its EAC partners to fully implement the WHO Protocol to Eliminate Illicit Trade in Tobacco Products, saying countries that enforce it effectively have recorded improved revenue collection even with higher taxes.

At the same time, public health advocates maintain that illicit trade is driven more by weak enforcement and fragmented regional tax structures than by high taxation itself, as East Africa continues to see growing use of cheaper nicotine products such as e-cigarettes and nicotine pouches among young consumers.

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