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Benefits of a higher tax on cigarettes beyond protecting Ugandan cigarette manufacturers.

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Benefits of a higher tax on cigarettes beyond protecting Ugandan cigarette manufacturers.
In 2017 parliament of Uganda amended the excise duty Act no. 11 of 2014. The Excise duty (Amendment) Act no. 11 of 2017 in section 2 imposes different excise rates on locally and foreign made cigarettes (soft cap and Hinge lid). 

This amendment is a matter of contention in the East African Court of Justice (EACJ) that slapped an injunction on Uganda (Revenue Authority) on the 25th of January 2018 to stop forthwith collecting billed excise duty on British American Tobacco (U) LTD that shifted operations to Kenya. The Parliament of Uganda has ever since asked the Attorney General to Appeal.
 
While at Piato Hotel on the 7th of February 2018 in a CSO and members of School management committees in Kampala organised by the Uganda National Health Consumers Organisation, Hon. Isaac Mulindwa Soozi, the Lugazi Municipality member of parliament and member of the finance committee of parliament, said that they (MPs) imposed higher excise duties on foreign manufacturers to protect the local cigarette manufacturers. 
 
Hon. Andrew Kaluya, member of parliament for Kigulu County South, Iganga District, disagreed with the notion of protecting any cigarette manufacturers given that both manufacture products that demand strong controls. On the contrary availing alternative crops to farmers makes the most feasible argument. 
 
I, with great pleasure, acknowledge that Uganda removed tobacco from its priority crops. 
It must be recalled that section 23 (a) of the Tobacco Control Act no.22 of 2015, prohibits persons that contribute(d) to the formulation....of public health policies on tobacco control from providing any incentive, benefits or privileges or preferential tax exemptions to the tobacco industry. Why would parliament that passed the law be the one breaking it?  I think it is an indictment on parliament. It is against this background that I move that the excise duty law be reformed to make cigarettes very expensive. 
 
Tobacco Kills 
While we're on this subject, tobacco manufacturers agree that tobacco use affects the lungs, causes heart diseases and kilsl its consumers. A National NCD risk factor survey conducted in 2014 shows that one in every four adults in Uganda suffers from a non-communicable disease.  However, the Centre for Tobacco Control Africa (CTCA) in 2017 found that, the total health cost of tobacco use including the direct cost of treatment and the indirect costs of loss of income and productivity from death and disability in Uganda, is UGX 328.82 billion, which is equivalent to US$126.48 million. 
Expensive cigarettes translate to health gains  

When taxes increase cigarette prices, the poor get more health benefits. The relationship between price and income informs household choices and eradicates gender based violence. When prices increase faster than salaries, people must earn more to afford their cigarettes, which decreases cigarette consumption and increases the rate of quitting. 
The World Health Organisation (WHO) estimates that if all countries increased taxes on cigarette packs by 50%, there would be 49 million fewer smokers and this would avert 11 million deaths from smoking. (Unpublished WHO simulations using the 2012 data). The benefits of cessation are many and occur for a number of serious diseases soon after quitting. Only one year after quitting smoking, the risk of coronary heart diseases is about half that of a smoker. The stroke risk is reduced to that of non-smokers 5 to 15 years after quitting. After10 years of cessation, the risk of lung cancer falls to about half that of a smoker, and there is a decreased risk of cancer of the mouth, throat, oesophagus, bladder, cervix and pancreas. 
France, for example, increased its taxes substantially and regularly between the early 1990s and 2005, tripling its inflation-adjusted cigarette prices. This was followed by a reduction in sales by more than 50%. The health impact of this dramatic reduction in consumption was seen just a few years later with a reduction in lung cancer death rates for young men. Death rates went down by 50% during the same period. After a period of unchanged tax rates between 2005 and 2009, France has started to regularly increase tobacco taxes since 2010.
 
Raising taxes on tobacco improves economies for Government
In Egypt, the government substantially increased the tobacco tax in 2010. The tax per pack for the most popular brand of cigarettes increased by 46% from 2.95 Egyptian pounds (EGP) to 4.32 EGP. This reduced sales by 14% in only two years. The impact on revenues was colossal, increasing by 151% from 7 billion EGP to 17.6 EGP between 2010 and 2012. 
In addition to reducing tobacco use and the associated health burden, tax increases generate substantial additional revenues to governments. Tax increases are a win-win situation because they are good for both public health and government revenues. Government revenues raised in this way can be used for health and other public benefit.
 
Gambia changed the base for its excise on cigarettes from weight to volume in 2012. Evidence shows that basing taxes on weight of tobacco encourages the industry to produce lighter – but not less harmful – cigarettes to pay less taxes.
 
In 2013, Gambia also raised the excise on all tobacco products to the same rate. This has the benefit of discouraging consumers from switching to a cheaper product when taxes are increased. Governments around the world tend to impose higher taxes on cigarettes than on other tobacco products, leading to price differences and encouraging substitution from higher priced products (usually cigarettes) to cheaper tobacco products such as water pipe tobacco or roll-your-own cigarettes. Taxing all products similarly leads to a harmonization of prices and reduces incentives for substitution.
 
A number of countries around the world impose complex systems of tobacco excise, which are difficult to administer and subject to loopholes. The tobacco industry takes advantage of these loopholes to avoid paying the full amount of taxes. The resulting loss of revenues for the government and the difficulty to translate into price increases and reduced affordability for consumers makes these taxes and tax increases ineffective.
 
This reduced the tax tiers from four to two in 2013 and brought them down to a single uniform rate in 2017. The reform also removed tax obligations which favoured one company over another. In addition, a provision was introduced to have automatic annual increases in the tax until 2017, with more rapid tax increases on lower priced brands. Since implementing the reform in 2013, the Government reports that tobacco prices have gone up, sales have gone down and revenues have increased substantially.
 
Cheap cigarettes obtaining on the Ugandan market are a result of our weak tax law that makes tax administration difficult and thus making the routine tax imposed every financial year a nuisance to quitting. It undermines generation of revenue and the expected health dividend that comes with reduced health expenditure on tobacco-induced diseases.  
 
2 comments
Level 2 (XP: 500)
Our tax advocacy has taken on new and sustainable approaches and we have convinced Ministry of Finance and the ministry of Health has agreed to market a position paper that seeks to reform all tobacco products so that they become extremely expensive for every person in Uganda, I agree and we're reading classical cases to improve the fact that Uganda is not a smoking Country but the PEARL OF AFRICA.
Level 2 (XP: 400)
The world needs to follow the example of Bhutan -- start a serious movement towards a TOBACCO FREE WORLD! It will not be smooth-sailing, but it is movement in the right direction. Uganda Parliament and "Government"are just flapping in the wind! Incidentally, I might have told you (MM) that, when I look at things that I value, contributions that I have made to the world, things that make me tick ....., Bhutan is the country in the world that I most identify with.

Here are some excerpts from an Al-Jazeera report on the Bhutan "Tobacoo-free country" initiative.

"...... the government passed the Tobacco Control Act in 2010, under which smoking cigarettes or chewing tobacco became a non-bailable offence. Anybody in possession of tobacco could be imprisoned for a minimum of three years if the person is unable to produce a receipt declaring payment of import duties for the products.

Last year, more than 80 people were booked under the new law and nearly half of them were sent to prison. The first one to be imprisoned was Sonam Tshering, a Buddhist monk, who was caught with 180 grams of chewing tobacco worth 120 ngultrum (about $2.25).

This resulted in a public outcry, ......

Under public pressure, the parliament amended the act and passed the Tobacco Control (Amendment) Act in January 2012. The amended Act has increased the permissible amounts of tobacco that can be imported for personal consumption. One can now import 300 cigarettes, 400 bidis, 50 cigars and 250 grams of other tobacco products. However, one has to produce receipts for import duties if caught with these products or face hefty fines."

Go to full article: http://www.aljazeera.com/.../2012/09/201292095920757761.html

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