The Ghana Revenue Authority (GRA) says plans are underway to revise the current tax structure on tobacco products in the country.
Tobacco products such as cigarettes, cigars, and cheroots are taxed in Ghana. The taxes include excise tax and sales tax or VAT, import duty, a health insurance levy, ECOWAS levy, and economic development and investment levy.
Despite the many levies on tobacco products, the taxes form just a small fraction of the retail sales price.
The reason is that Ghana uses an ad valorem rate of 175 percent of the insurance and freight (CIF) value to determine the excise to be paid and because the CIF value is a small fraction of the retail price, the excise tax also becomes low.
Due to this, stakeholders have, for many years now, called for a specific excise tax for tobacco products to gain more revenue for the country and reduce consumption of the products at the same time.
In response to this, the Ghana Revenue Authority says 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.
The Head of Excise at the Authority, Kwabena Apau Awuah, spoke to Citi Business News at the launch of a study report on the Economics of Tobacco Taxation in Ghana organized by the Vision for Alternative Development.
“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.”