Stringent tax regime and the unwanted fatalities from tobacco use
By Abubakar Jimoh and Austin Erameh
The dreaded but preventable impacts of tobacco use like diseases and premature deaths in Nigeria with various studies showing potential opportunities for the country, if redirected focus on preventive rather than curative measures to mitigate effects of tobacco led to the intensive advocacy by Civil Society group for comprehensive National Tobacco Control Act to domesticates the World Health Organization’s Framework on Tobacco Control (WHO-FCTC).
Reports by WHO have shown that tobacco use costs national economies immensely through increased health-care cost and decrease productivity. It worsens health inequalities and increase poverty as the poorest people spend less on essentials such as food, education and health care.
While stringent measures like increasing taxes and levies on tobacco products have proven to reduce consumption and generates revenue which can be used to finance universal health coverage and other developmental health programme.
In order to mitigate illicit importation, distribution and sales of tobacco product through tax avoidance, WHO Protocol to Eliminate Illicit Trade in Tobacco Products was introduced to prevent tobacco illegal trade and secure supply chain of tobacco products through a series of government measures.
Effort to devise implementation strategy and adopt holistic fiscal measures to discourage consumption of tobacco and its associated risks in accordance with provisions of the National Tobacco Control Act, 2015 brought to limelight a two-day workshop of Technical Working Group on Tobacco Taxation in Nigeria.
The workshop organised by the Federal Ministry of Health, in collaboration with Civil Society Legislative Advocacy Centre (CISLAC), with support from African Capacity Building Foundation (ACBF), in Keffi, Nassarawa state specifically aimed at enlightening relevant health institutions on financial benefits of increased tobacco tax, advocate for and recommend new tobacco tax regime to Government, canvass for the removal of tobacco industries from enjoying any government incentive, while highlighting the roles of Ministries, Departments and Agencies as critical stakeholders in the successful implementation of the National Tobacco Control Act.
Giving the importance of policy advocacy to achieving effective implementation of the Act, Okeke Anya, Program Manager (ECOWAS & AU), CISLAC, disclosed that policy advocacy would help in building knowledge on the devastating consequences of Tobacco on Health, taxation in general, and create a multi-sectoral partnership for effective implementation of laws, policies and guidelines.
He listed as part of advocacy achievements on Tobacco Control in Nigeria: the implementation of Signing and Ratification of World Health Organisation- Framework Convention on Tobacco Control (WHO-FCTC), passage and assent of the National Tobacco Control Act, appropriate support rendered in the draft of Tobacco Control Regulations, initiation of legislative framework that expunged weak provisions of the Act, and improved media coverage of tobacco control issues.
Recounting the socio-economic losses to tobacco use in the country, Dr. Chukwuka Onyekwena representing the Centre for Study of Economies of Africa (CSEA), stated that economic losses in the form of medical treatments and loss of productivity from tobacco-related disease amounted to US$ 591 million in 2015 with no fewer than 17,500 deaths annually.
Dr. Onyekwena tried to establish relationship between poverty and tobacco use, sting that tobacco use and poverty are intertwined as observed in recent development.
“An average smoker spends 7.8% of national median income to purchase 10 sticks of the cheapest cigarettes each day, making less money available for other basic items,” he lamented.
Examining the current status of tobacco taxes in Nigeria, Dr. Onyekwena said about 80% of legally consumed tobacco products were domestically produced with British America Tobacco Nigerian (BATN) taking largest market share of 75%, followed by Leave Tobacco and Commodities Nigeria Ltd and International Tobacco Company (ITC).
He observed weak tax structure for tobacco use with low tax rate of 25% as against as against the 75% of retail price recommended by WHO as baseline, adding that Nigeria recorded one of the lowest Value Added Tax rates in the world.
“Nigeria runs an ad valorem tax structure, while WHO recommends specific tax structure. Ad valorem tax structure is susceptible to undervaluation; encourages price reductions; disincentivizes costly ‘quality’ improvements; and encourages ‘trading down’ in favour of cheaper tobacco products.
“It does not incorporate a minimum retail sales price and tax administrative system remains weak,” Dr. Onyekwena.
He posited that such comprehensive strategy as stronger tax administration, improved boarder control, appropriate monitoring and tracking systems, and significant increase in excise tax in line with WHO benchmark could yield optimal outcomes for public health and government revenue.
Giving the level of implementation of the National Tobacco Control Act, 2015, Dr. M.T. Malau, Branch Head, Tobacco Control Unit, Federal Ministry of Health bemoaned among other things delayed in the development of Strategic Plan of Action for implementation, Tobacco Control Fund, and absence of Tobacco Control Coordinating Mechanism at States and Local Government Areas, as required under the Act.
He advised that implementation of the National Tobacco Control Act 2015 would protect present and future generations of Nigerians and residents of Nigeria from the devastating health, social, economic, and environmental consequences of the use of tobacco products and exposure to second-hand tobacco smoke.
Dr. Malau itemised as part of the underlined strategies to achieve effective implantation: development National Tobacco Control Strategic Plan of Action, implementation of tobacco taxation, ratification of protocol on illicit trade, commencement of process to adopt tracking and tracing system to reduce illicit trade on tobacco products, establishment and operationalization of the Tobacco Control Fund.
Other strategies include issuance of license to tobacco industry, development of guidelines on tobacco cessation and integration of tobacco dependence and cessation services into existing health facilities, and intensified awareness campaign against tobacco use.
Stakeholders at the summit called for policy consciousness on the illicit importation of tobacco, a growing misconduct prohibited by law, found in the production, shipment, receipt, possession, distribution, sale or purchase of tobacco products.
They warned the government against the continued trading of tobacco products across and within borders without payment of local excise taxes through such illicit practices as illegal manufacturing, distribution and sales that could further exacerbate the precarious socio-economic impacts of tobacco use in the country.
“A way to penetrate new markets is achieved by selling cigarettes without paying all applicable taxes. Illicit trade is a threat to public health and the achievement of Sustinable Development Goals (SDGs). It can be addressed even in the presence of higher or rising tobacco taxes,” they cautioned.
Discussing illicit market penetration for tobacco importation, they observed that Nigeria formed part of large markets for illicit importation of tobacco products in Africa.
They observed other underlying factors for illicit importation of tobacco products like high level of corruption, lack of commitment to addressing illicit trade, ineffective customs and tax administration.
“Tobacco tax avoidance is determined by corruption, weak tax administration, poor enforcement, presence of informal distribution channels, presence of criminal networks, and increasingly access to cheaper sources,” they added.