Experts Seek 100% Excise Tax Increase on Tabaco to Boost FG’s Revenue
Eromosele Abiodun
Experts in the financial service sector have called on the federal government to ensure a decisive policy shift of 100 per cent excise tax increase on tobaco to boost its revenue as well as curb smoking prevalence, with obvious public health consequences.
Currently, Nigeria operates a mixed excise tax system on tobacco, comprising a 30 per cent ad valorem tax on the cost of production, a N84 specific excise tax per pack of 20 cigarettes, and additional levies on shisha and other tobacco products.
The experts noted that the country’s weak tax regime not only fuels high tobacco use among young people, but also deprives government of badly needed revenue while allowing multinational corporations to rake in excess profits.
They made the observations at the validation workshop on the Tobacco Excise Tax Simulation (TETSiM) Report convened by Civil Society Legislative Advocacy Centre (CISLAC), in Abuja.
Director of the Research Unit on the Economics of Excisable Products (REEP) at the University of Cape Town, South Africa, Corné van Walbeek said the evidence from hundreds of studies worldwide indicates that the price elasticity of demand for cigarettes is between -0.4 and -0.8.
He said, “This means that for every 10 per cent increase in the price of cigarettes, cigarette demand is expected to decrease by between 4 per cent and 8 per cent. “Young people tend to be more price sensitive than older people, mostly because they have less money to spend, and because they are often less addicted than older people. This increased sensitivity to tax increases makes tax-led price increases a particularly effective tool to reduce smoking among young people.”
On his part, the Senior Programme Manager at CISLAC, Solomon Adoga, said Nigeria has a hybrid tax system on cigarettes.
“It consists of a specific component, which is currently 104 naira per pack, and an ad valorem component, which is currently 30% of the declared value of production. These taxes are paid by the producer, who then passes on these taxes to the consumer in the form of higher retail prices”, he said.
Speaking, Policy Officer (Tax and Equity) at Tax Justice Network Africa (TJNA), John Thomi said tobacco use continues to account for nearly 16,000 deaths yearly with the economic cost of tobacco use estimated at more than 200 billion naira each year.
Thomi stated that the detrimental consequences of smoking are well established.
“Smoking causes cardiovascular and lung diseases, and a range of cancers. Researchers estimate that smoking causes the premature death of 50% of regular users. The government of Nigeria needs to decide to protect the health of Nigerians as a leading country in ECOWAS by following the Directives that have been agreed upon by all member states,” he said.
