VALD-Ghana is pushing for periodic updates to tobacco excise taxes to keep up with inflation and maintain their effectiveness in reducing consumption.
Inflation and currency shifts in Ghana have weakened the real value of the current excise tax on tobacco, making products more affordable and less effective in curbing use. “Periodic reviews and increases to the specific excise tax can ensure that tobacco products remain unaffordable over time, reducing consumption in the long term,” VALD-Ghana emphasized.
Mr. Labram Musah, Executive Director of Programmes at VALD-Ghana, highlighted the urgency during a stakeholders’ meeting on Excise Tax Implementation. The organization’s recent assessment revealed that the tax, initially set at $0.02 (0.28 pesewas), has lost its punch due to high inflation and currency depreciation.
Stabilizing the Excise Tax: A Strategic Move
To tackle this issue, VALD-Ghana recommends pegging the specific excise tax to the US dollar, aligning with ECOWAS directives. “This measure would stabilize the real value of the tax, preventing fluctuations that make tobacco more affordable,” Musah explained. By doing so, the tax’s deterrent effect against tobacco consumption can be sustained despite economic changes.
Benefits of Pegging to the US Dollar
- Consistency: Maintains the tax’s real value over time.
- Inflation Resistance: Shields the tax from local currency depreciation.
- Policy Effectiveness: Ensures ongoing reduction in tobacco use among price-sensitive groups.
This approach is supported by the World Health Organization, which states, “When tobacco taxes do not keep pace with inflation, the effectiveness of these taxes in reducing consumption diminishes, allowing tobacco use to persist among price-sensitive populations.”
Positive Outcomes from Recent Tax Implementation
Dr. Alex Kombat, Senior Revenue Officer of the Ghana Revenue Authority, shared promising results from the Excise Duty Amendment Act. Since its implementation over a year ago, the specific excise tax on tobacco has generated GH¢252,477,842.68 in revenue for Ghana. “This is a remarkable achievement,” Dr. Kombat noted, highlighting the dual benefits of increased revenue and reduced tobacco use.
Revenue and Public Health Gains
| Metric | Amount (GH¢) |
|---|---|
| Total Revenue Generated | 252,477,842.68 |
| Reduction in Tobacco Consumption | Significant impact |
| Fiscal Sustainability | Enhanced |
The funds raised are being funneled into priority areas like healthcare, further emphasizing the tax’s role in supporting public welfare.
Challenges and Future Directions
Despite these successes, challenges remain. The primary issue is ensuring that the excise tax keeps up with ongoing economic changes. Without regular adjustments, the real value of the tax will continue to erode, undermining its effectiveness.
Mr. Musah stressed the importance of proactive measures. “We need to peg our specific excise component to the US dollar to stabilize its value,” he urged. This strategy is crucial for maintaining the tax’s role in public health initiatives and revenue generation.
Addressing Inflation and Currency Depreciation
- Regular Adjustments: Scheduled tax reviews to match inflation rates.
- Economic Monitoring: Continuous tracking of currency fluctuations.
- Policy Adaptation: Flexibility to implement changes as needed.
Community and Stakeholder Engagement
VALD-Ghana’s push for tax adjustments has garnered support from various stakeholders, including public health officials, community leaders, and economic analysts. The organization is committed to working collaboratively to ensure that the excise tax remains a powerful tool against tobacco use.
Voices of Support
“We recognize the importance of keeping tobacco unaffordable to protect our youth and vulnerable populations,” said Dr. Kombat. “Regular tax adjustments are essential to sustaining the positive impacts we’ve seen so far.”
Community leaders echo this sentiment, emphasizing the role of the excise tax in promoting healthier lifestyles and reducing the burden of tobacco-related diseases on the healthcare system.
Looking Ahead: Strengthening Tobacco Control
As Ghana moves forward, the focus will remain on refining and enhancing the excise tax structure. VALD-Ghana is advocating for a dynamic policy that adapts to economic realities, ensuring that tobacco control measures remain effective in the face of changing financial landscapes.
Strategic Goals
- Long-Term Policy Stability: Ensuring the excise tax remains effective through economic shifts.
- Enhanced Public Health Outcomes: Continued reduction in tobacco consumption and related health issues.
- Sustainable Revenue Streams: Supporting healthcare and other critical sectors through robust tax revenue.
By prioritizing regular tax adjustments, VALD-Ghana aims to create a resilient framework that can withstand economic challenges and continue to protect public health.
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