A study by the Institute of Statistical, Social and Economic Research (ISSER), has said if excise tax was levied as a specific tax on tobacco, it would significantly improve the fiscal and public health effects in Ghana.
However, it said, 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 was on Fiscal and Public Health Impact of a Change in Tobacco Excise Taxes in Ghana and 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.
The meeting was organized by the Vision for Alternative Development (VALD), a civil society organization, in collaboration with the Ghana Revenue Authority in Accra.
The study said in the developed economies, tobacco was less affordable over time due to increase in taxes while in the developing economies, including Ghana, tobacco products were more affordable with minimal change in taxes.
It said although Ghana imposes the highest Ad-valorem tax rate of 175 per cent in the sub-region, it was 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.
It noted that by 2030 more than 80 per cent of tobacco-related diseases would be from low and middle-come countries and 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 study stated that Article six 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 (ECOWAS Protocol, 2017).
“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),” it stated.
The study said effective implementation of the specific mixed tax system required strong tax administration, political-will with technical capacity.