Successive Tax Increase in Store for Tobacco Products

ADDIS ABABA – Unlike sugar which will enjoy an excise tax cut soon, ministry of finance revealed on Wednesday government’s plan to impose more excise tax increase in the near future.

The bill, presented to parliament fortnights ago, proposes a tax cut on sugar to 20% from 33% to encourage investors ahead of government’s move to privatize the sugar industry as part of its drive to open up the economy.

Tobacco and Tobacco products, on the other hand, will not only be subjected to more excise tax when the new bill enacted but also more tax increase is in store.

The government would also introduce more tax increase on the products in the near future, said Eyob Tekalgn, state ministry of finance.

This would be made in a bid to reduce consumption, the state minister said during a discussion with stakeholders on the draft excise tax proclamation on Wednesday.

The drafted tax law says tobacco products will be subjected more than 30 percent excise tax (leaf 20 percent, cigarettes per pack 30 percent, plus 30 percent/kg for cigars and others).

For now, the focus will be to control the increasing contraband tobacco products trade in the country, the official said.

“When we do that, more taxes will be introduced,” he said in consultation with key actors in the area.

A significant excise tax has not been proposed on the products due to the increasing level of the illicit tobacco trade in Ethiopia.

It will be very difficult to impose more now as can lead the local tobacco factory out of the market, he said.

Around 45% of the product in Ethiopia imported into the country by contraband traders, revealed a National Tobacco Enterprise S.C that currently holds a monopoly on import and export of tobacco products in Ethiopia.

Yayehyirad Abate, a spokesperson of National Tobacco Enterprise S.C., said “we don’t mind if the government imposes an excise tax on tobacco products”

It has to equally exert more effort to tackle the illicit trade of tobacco products, said Yayehyirad.

A government official also said the country is now working on deterring contraband tobacco trade by stumping unique symbols on taxed tobacco as well as alcohol products.

The symbols would make these products could easily be recognized as legal.

According to government, if any person is seized by police while selling the untaxed products, the suspect may be put from 3 to 5 years in prison.

The main advocator of anti-tobacco in Ethiopia, however, said the government should start imposing more tax on the product now.

“We are losing more lives due to tobacco-induced cancer and should come up with tougher tax to discourage users of the produce,” said Wondu Bekele, executive director of Mathiwos Wondu – YeEthiopia Cancer Society.

He also proposed “the tax earned from tobacco should be again invested to the rehabilitation center”.

Mhret G/Kristos