How has the tobacco industry passed tax changes through to consumers in 12 Sub-Saharan African countries?

Abstract

Introduction Tobacco taxation is the single most effective tobacco control policy that reduces affordability and consumption; however, it is only effective in reducing tobacco use when increase in taxes is translated into higher prices. Empirical evidence suggests that the tobacco industry (TI) weakens the effectiveness of taxes by employing a range of targeted pricing tactics. 1-4 This study therefore aims to investigate the TI’s price-based response to taxation and tax pass-through to consumers, both for cigarette packs and single-sticks, in Sub-Saharan Africa (SSA) countries. This is the first multi-country study from Africa that looks at industry’s pricing strategies in 12 countries simultaneously (Botswana, Ethiopia, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Nigeria, South Africa, Tanzania, Zambia, Zimbabwe) and also the first study that includes the pricing for single-sticks in Africa. Methods The study used the most recent African Cigarette Prices (ACP) Project datasets (2016-2020) 5 for 12 SSA countries, along with taxation information from the WHO’s Global Tobacco Epidemic Reports (GTR). 6 The TI's pricing strategies were examined, and differentiated according to brands, producers and price segments. Results Tax increases on cigarettes (both packs and single-sticks) were not linearly passed on to the consumers in the 12 SSA countries examined, and the TI was found to employ differential tax shifting practices whereby taxes were either overshifted (price increased more than the tax increase) or undershifted (absorbed some of the tax increase) or a mix of both the patterns was observed. Conclusions This paper provides a general description of the TI pricing strategies in response to tax increases in SSA countries and provides policy recommendations that will be helpful for the particular countries examined and also other countries in similar situations for the effective implementation of targeted regional tax directives. The results suggest there remains scope for further tax increases in SSAs. Consequently, there is a critical need for key data and more country-specific analysis, independent and peer-reviewed research to buttress these findings and inform national policies. This abstract has not been published or presented before in any other conference or communication material.

Keywords

• tobacco industry
• tobacco taxation
• tobacco control policy