A Ghanaian policy think tank, Vision for Accelerated Sustainable Development Ghana (VAST Ghana), has strongly advised the Ministry of Finance to uphold and potentially increase existing excise taxes on tobacco, alcohol, and Sugar-Sweetened Beverages (SSBs).
In its Mid-Year Budget Review proposal submitted on Monday, July 21, VAST Ghana highlighted the significant health benefits and unexpected revenue windfalls generated by the Excise Duty Amendment Act, 2023, urging the government to resist industry pressure for tax reductions.
VAST Ghana’s call comes amidst growing concerns over Non-Communicable Diseases (NCDs) in Ghana, which now account for approximately 45% of all deaths.
Premature mortality among adults aged 30-70 from NCDs stands at 21%, exceeding global averages.
The consumption of tobacco, alcohol, and SSBs are major drivers of these diseases, imposing substantial economic costs through lost productivity and increased healthcare expenditures. According to the World Health Organization (WHO), over 37,000 deaths in Ghana annually are attributable to alcohol-related conditions alone.
The Excise Duty Amendment Act, 2023, enacted in line with ECOWAS Directives and WHO’s “best buy” interventions, introduced a uniform excise framework: a 20% tax on SSBs, varying rates on alcohol (47.5% on beer, 25-47.5% on wines and spirits), and a hybrid system for tobacco (US$0.02 per stick alongside 50% of CIF).
This reform simplified enforcement for the Ghana Revenue Authority (GRA) and aimed to align Ghana with international best practices, where WHO recommends tobacco excise tax comprise at least 75% of the retail price.
Prior to the reform, Ghana’s tobacco tax share was a mere 22-28% of the retail price.
The fiscal impact of the new taxes has been “dramatic,” according to GRA data cited by VAST Ghana. Excise revenue from SSBs alone surged from GHS 735 million in 2022 to GHS 1,325.6 million in 2023.
Combined revenue across tobacco, alcohol, and SSBs is estimated at over GHS 1.5 billion, exceeding initial predictions.
Tobacco excise revenue specifically jumped by 106%, from GHS 220.8 million (May 2022-April 2023) to GHS 454.5 million (May 2023-April 2024), despite tax waivers for ECOWAS tobacco products.
“This revenue growth illustrates not only the effectiveness of the excise tax system but also its potential to finance public health initiatives that combat the very NCDs being fueled by these products,” stated Labram Musah, Executive Director of VAST Ghana.
Citing WHO modeling, VAST Ghana’s proposal highlighted the dual gains from excise taxes:
- A 20% excise price increase on tobacco could reduce consumption by 26.6% in 2023, generate GHS 131 million extra revenue, and avert over 34,600 deaths.
- A similar 20% uplift for alcohol could raise GHS 2.4 billion and reduce consumption by 7.6%, averting over 44,000 deaths over a century.
- SSB taxation at that level could reduce consumption by nearly 24%, raise GHS 1.0 billion, and avert 155,000 deaths across a century.
VAST Ghana dismissed industry criticisms regarding job losses, reduced investment, or increased illicit trade, stating that evidence from Ghana does not support these assertions.
They argue that tax reductions would reverse measurable health gains, undermine the recent fiscal windfall, and signal a lack of resolve regarding Ghana’s international commitments, particularly under the WHO Framework Convention on Tobacco Control (FCTC).
The organization further stressed that taxes on unhealthy products are “progressive in health outcomes,” as lower-income and vulnerable groups tend to exhibit the greatest consumption reductions when faced with price increases, thereby helping to close health inequity gaps.
In its recommendations to the Ministry of Finance, VAST Ghana urged the government to:
- Uphold current excise tax rates on tobacco, alcohol, and SSBs.
- Consider an upward review of these excise taxes.
- Earmark a portion of the revenue for public health initiatives and specifically to support the Ghana Medical Trust Fund, which is purposely created to finance NCDs.
- Prioritize public health over commercial interests and strengthen enforcement mechanisms to combat illicit trade.
- Establish a robust framework for continuous monitoring and evaluation of the impact of these taxes.
“Any reduction or downward review of the Excise Tax will have a huge setback on the government’s flagship program, the ‘Ghana Medical Trust Fund,’ to the extent that the number of NCDs cases will increase significantly, which can lead to unsustainability of the Trust Fund,” the group warned. They advocate for indexing excise taxes to inflation to ensure fiscal responsibility and defend public interest.
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