The Ministry of Finance and the Ghana Revenue Authority (GRA) have been asked to consider the revision of the current tobacco tax structure in order to significantly reduce its consumption in the country.
According to a new study report on the economics of tobacco control in the country, tobacco taxes are purely ad valorem which makes it prone to manipulation by the tobacco industry.
“The government should therefore consider adding a specific tax component to the ad valorem tax,” the report commissioned by the Vision for Alternative Development (VALD), said.
It said the specific tax should be pegged to the US Dollar or to the inflation rate so that government may not need parliamentary approval for regular adjustments.
“Thus, after the specific tax system has been adopted, the government should adopt the minimum specific tax rate of US$o.02 per cigarette along with the ad valorem tax system, and such specific tax rate should be implemented in real time,” it explained.
The report is of the view that the policy would address some of the problems of the ad valorem tax system the country is implementing.
“As has been shown in previous simulations, implementing these tax policies will not only reduce cigarette consumption by about 17% but will also increase tobacco tax revenue by 114%, amounting to about GH¢111 million in just a year. It is worth emphasizing that our call on government to increase tobacco tax is not for the purpose of raking in more revenue, but a move to control tobacco consumption,” it emphasized.
In response, the Ghana Revenue Authority has said it is in talks with the relevant parties to implement the twin policy of ad valorem and specific excise duty on tobacco products later this year.
Head of Excise at the Authority, Kwabena Apau Awuah, speaking at the launch of the study said, “Discussions are ongoing at the national level together with the GRA and Finance Ministry to introduce a mixed ad valorem and specific excise duty on tobacco. That is a decision that has been taken at the ECOWAS level. There is a directive that requires all member states to introduce at least 50% of ad valorem excise duty on tobacco products and a specific excise duty of two cents per stick.”
“If these measures are introduced, it’ll address the question of the difficulties that we are having on taxing the right value. Even though our excise duty rate on tobacco is very high because the value on which the tax rate is imposed is low, we still have difficulties in getting the right impact by increasing the price so that it becomes out of reach for the ordinary Ghanaian.”
By Jamila Akweley Okertchiri