CSOs back increased sin taxes; say this will safeguard NHIS, save gov’t millions

The Ghana Non-Communicable Diseases (NCD) Alliance, a coalition of civil society organisations (CSOs), has welcomed the imposition of excise duty on products classified as unhealthy and harmful to humans; saying this will save government millions through the National Health Insurance Scheme (NHIS).

The group said a 20% increase on taxes for alcoholic, tobacco products and sweetened drinks – also known as sin taxes – passed by parliament last month will serve as a disincentives for the availability, accessibility and affordability of sugar-sweetened beverages and other unhealthy commodities such as tobacco, which in the long-run cause serious ill-health effects on users… who consequently likely rely on the NHIS for treatment.

“The wide availability, accessibility and affordability of sugar-sweetened beverages and other unhealthy commodities have increased remarkably over the past decade. The result of a shift from healthy foods to junk foods is seen in the rising rates of obesity, especially among children, as well as other diet-related NCDs. Obesity leads to comorbidities with other non-communicable diseases such as cancer, mental illness, hypertension, bone diseases and cardiovascular disease,” it said.

Economically, a team of Ghanaian researchers (Lartey et. al 2020) found that the average healthcare cost per admission for adults of healthy weight is US$35, whereas for overweight adults it is US$78 and for adults with obesity US$132. The study further estimated that 60 percent of the average total cost per person expended is borne by the National Health Insurance Scheme (NHIS).

“This means that government is paying huge sums of money for the treatment and care of obesity and its related diseases, when lives and money could be saved with preventive tax policies on SSBs, tobacco and alcohol,” says the alliance.

“As the healthcare costs and deaths linked to these health-harming products keep increasing, this is the right intervention to protect young people, promote health outcomes and guarantee sustainable financing for public health service delivery,” its National Coordinator, Labram Musah, said while lauding parliament for its recent passage of the Excise Duty Amendment bill 2022.

Wrong approach

Meanwhile, in an interview with the B&FT, Ali-Nakyea Abdallah – a tax expert and a Senior Lecturer at the University of Ghana-School of Law, said the whole conversation around the increase of sin taxes centres largely on revenue mobilisation: an attitude that he said contributes to resistance from the business community.

“The way government presents it is that we are going to raise so much from it, which gives the indication you are bringing it for purposes of revenue. I think the communication was a problem. When you approach taxation in such a manner as a consultative approach and sending the right signals – that the role of this tax is to assist us in addressing a health challenge – you will then win support from the tax-paying population, and also win the support of manufacturers.

“Yes, the CSOs have a point; and that is what I found missing in the conversations about the taxes. If you put all together and say this is one of the ways by which the International Monetary Fund will grant us the money we want, then you are bringing in a revenue measure and not necessarily a health solution. So, if your target is for the purpose that the CSOs are saying, then the revenue becomes an offshoot of what you intended to do. It is not your main purpose but a by-product of your health measure. Sin taxes are not targetted for revenue mobilisation, but rather to resolve the health challenge – which as a byproduct also brings government revenue.”

He further noted the taxes in this case may not necessarily solve the health issues which CSOs are talking about, adding the case could have been different if there was broader stakeholder consultation prior to the increase.

“You see, if the sugar content of these identified products is leading to increasing cases of diabetes and other health challenges that are draining our health insurance, then the manufacturers will find other ways of producing to either reduce or eliminate those components which lead to the sicknesses.

“But if you go at it like a revenue measure, then if I am a producer and I have market for my produce and I know if I increase my prices they will buy, then the taxes you are raising cannot solve the health challenge that you are targetting. So if your issue was to deal with the health challenge, you will be defeated.

“That is why I keep saying that taxation requires stakeholder engagement with the manufacturer, the tax payer, the consumer and institutional bodies like the Food and Drug Authority and Ghana Standards Authority,” he said.

Excise Duty Amendment bill 2022

Parliament on the 31st March 2023, in spite of industry resistance, passed among other key revenue bills the Excise Duty (Amendment) bill, 2022; which will revise excise tax rates for cigarettes and other tobacco products to conform to the Economic Community of West African States (ECOWAS) protocols and raise revenue to mitigate the harmful effects of these excisable products. It also increases excise duty on wine, malt drinks and spirits, and imposes excise duty on sweetened beverages and electronic cigarettes to increase revenue.

According to the group, the resulting impacts on listed products that will be affected by the newly introduced taxes on health and economy are enormous; hence they must be prioritised over the public outcry of resisting more taxes.

“It is noteworthy that the impact from revenues of taxes, to promote healthy diets, depends largely on how the taxes are designed and administered. Country experiences indicate that these taxes can generate additional revenue, which can then be used to finance health or social initiatives.

“Excise taxes are often misconceived as being regressive, affecting vulnerable populations such as young people and poor people. It is therefore important for the industry to know that a lot of evidence shows that poor consumers are far more responsive to increases in price than higher income ones. More especially because of the inelastic nature of health-harming products and due to their addictive nature, the imposition of taxes will not stop consumption entirely, but rather reduce their consumption and increase revenue substantially,” Mr. Musah added.

The coalition implored Ghanaians to appreciate health gains of the Excise Duty Amendment bill, calling on stakeholders in the public health space to amplify requests for presidential assent to the bill.

“Industry should also know that no one is calling for a ban on these products, but for them to allow some level of effective regulations to reduce the increase in NCDs and ease the financial burden from people’s healthcare costs, death and disabilities,” Labram Musah further said.