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Business News of Thursday, 30 July 2015

Source: B&FT

Gov’t raises tax on tobacco products

Government is optimistic Parliament’s approval for an increase in the excise duty on tobacco products, from 150 percent to 175 percent of the ex-factory price, will further discourage consumption of the products.

Ghana’s excise tax, as a percentage of cigarette prices, is considered among the lowest in the West African sub-region.

Now Parliament has approved the Excise Duty (Amendment) bill, 2015, which sought to amend the 2014 Act and increase the duty on cigarettes and cigars.

The bill will also substitute the ad-valerem rate of duty relating to tobacco products.

The chairman of the Finance Committee of Parliament, James Avedzi, in a report to Parliament indicated that the primary objective is increasing prices of tobacco products to make them costly to buy, in a bid to reduce consumption of tobacco products.

According to industry players, increases in tobacco excise rates are often included as a component of fund-supported stabilisation programmes for countries that need to mobilise additional tax revenue to reduce their fiscal deficit.

Some policy critics have already argued that if taxes on tobacco become too restrictive on industry, it will lead to a growing underground economy for tobacco products that may be counterfeits.

IMANI Ghana, which issued a communique sometime last year ahead of the budget reading, argued that an increment will expose the country to illicit trade in tobacco products as the excise rates in its neighbouring countries such as Togo, Burkina Faso and Cote D’Ivoire are lower.

“It will defeat all our public health campaigns, as one cannot guarantee the contents of illicit tobacco. Tobacco industries play a major role in African economies as far as their tax contributions are concerned, and thus their inputs in these discussions must be encouraged,” the group argued.