Uganda’s new cigarette tax increase a good move

On 12 June, Uganda’s Finance Minister Ezra Suruma announced in the FY 2008/ 2009 budget speech, an increase in excise duty on cigarettes. The measure will bring in an additional sh2.1b in government revenue.

This increase in cigarette taxes will also translate into better health for the people as cigarette consumption will drop, especially among the youth and the poor who are price- sensitive. The tobacco companies know this fully well and will not be happy to lose valuable customers of their deadly products.

The last time cigarette taxes were increased, back in 2005, British American Tobacco Uganda (BATU), in protest, temporary closed the Jinja tobacco factory and held ‘private discussions’ with Ministry of Finance officials. Within no time the previous excise duty on cigarettes was restored.

It will be interesting to see what tricks BATU will use this time, given that the Jinja Factory was ‘transferred’ to Nairobi in 2006 to optimize the BAT’s East African operations. One should expect the tobacco industry baseless argument that the increase in taxes will lead to smuggling. The truth of the matter is- smuggling occurs in all parts of the world including regions that have low taxes, and the tobacco industry itself has been known to facilitate smuggling operations and benefiting from the same.

The increase in cigarette taxes is indeed a double victory for Uganda- higher revenues for the government and a healthier population because of reduced smoking rates.