Recently, Ethiopia’s parliament unanimously approved one of Africa’s strongest anti-tobacco laws. Ethiopia’s new tobacco control law is comprehensive as it requires 100 percent smoke-free public and work places, bans tobacco advertising and promotions, restricts the sale of flavored tobacco products and mandates pictorial warning labels covering 70 percent of the front and back of all tobacco products. The law also bans the sale of heated tobacco products, e-cigarettes and shisha, and prohibits tobacco sales to anyone under the age of 21.
The impact of this law on the health of the people of Africa’s second most populous country, with more than 105 million people, and on human capital formation in the country, cannot be overestimated.
While tobacco use is concentrated among adult males (the prevalence of smoking is estimated at 11% among urban men and 21.6% among rural men compared to less than 2% among women), second-hand smoking puts unsuspected family members, particularly children, and people at work and in other public venues, at risk of developing or making worse a wide range of damaging health conditions including lung cancer, respiratory infections and asthma. Deaths from tobacco-related chronic diseases are already leading causes of years of life lost in Ethiopia. What is ominous in Ethiopia and other countries in sub-Sahara Africa, where smoking is on the rise, is the vulnerability of their large youth populations to initiate tobacco use encouraged by the “deception and manipulation” strategy of tobacco advertisement and marketing.
By contributing to prevent tobacco-attributable diseases, the effective implementation of the different provisions of the new tobacco law in Ethiopia will result in improved adult survival rates (i.e., the proportion of 15-year-olds who will survive until age 60). This positive health outcome, along improved nutrition, skills, knowledge and resilience, would be critical for human capital formation, hence to help Ethiopians be more productive, flexible, and innovative in the future.
As done in other countries at different levels of income, the Ethiopian government could further strengthen the public health impact of the new tobacco control law by raising tobacco taxes to hike up prices, reduce affordability of tobacco products, lower consumption among current smokers, and prevent smoking initiation among the youth. This could be achieved if the tobacco tax structure is modified by adopting an uniform specific excise tax, on top of the current ad valorem excise tax, and the amount and rate of these taxes are increased, respectively, on a yearly basis, taking into account inflation and income growth. The rationale for this proposed fiscal measure becomes clear when one considers that the retail price for a pack of 20 cigarettes of the most sold brand in Ethiopia at $0.69 (15.00 ETB) in 2016, is among the cheapest in the world, well below the sub-Sahara Africa regional average of $1.24 and the global average price of $2.15. And, as observed in other countries across the income spectrum globally, besides the public health benefits of tobacco taxation, there is significant potential for mobilizing additional domestic resources for development in Ethiopia
Some people will argue that if Ethiopia were to reform its excise tax structure and impose higher tobacco taxes, a regressive policy would be adopted, and the country will experience an increase in illicit tobacco trade. Accumulated evidence from across the world, however, suggests that these claims are unfounded.
Different country studies conducted by the World Bank Group show that a rise in tobacco prices have a pro-poor, progressive effect, as they generate positive income variations across the lowest income groups in the population (the bottom 20 percent), since poorer smokers respond more to changes in price than do richer smokers. This positive effect is further enhanced when lower medical expenses associated with the treatment of tobacco-attributable diseases and an expansion in working years are accounted. Also, a recent WBG global report documents that tobacco taxes are not the primary reason for cigarette smuggling and cigarette tax avoidance. Despite high cigarette prices due to high taxes in high-income countries, illicit trade is much less common in these countries than in low-income countries with low tobacco taxes. Non-price factors such as poor governance, weak regulatory framework, social acceptance of illicit trade, and the availability of informal distribution networks appear to be far more important determinants of the size of the illicit tobacco market.
In moving forward, the Ethiopian government could benefit from a large body of evidence on successful global practices in tobacco taxation, which points out that tobacco tax strategies should focus on health gains first, then on fiscal benefits. This means going for big tobacco excise hikes starting early in the process. Adopting a slow, cautious timeline might sound prudent. But it means condemning large numbers of people to avoidable health risks, including tobacco-attributable diseases and premature death, or in the case of the youth, to avoidable long-term addiction. And as shown by the experience in countries such as Botswana, Philippines and the United States, “soft” earmarking of funds — for example, linking increased taxes to increased health spending or other priority programs and investments that benefit the population as a whole– would help generate grassroots support for proposed tobacco tax hikes.
Blog World Bank
