The responsibility of the government of Ghana is to protect the citizenry against any health risks associated with consumption of harmful products. One means of doing this is through imposition of health taxes also known as excise taxes (or sin taxes – a dated terminology). Generally, the government imposes health taxes to curb consumption of harmful products, reduce healthcare and environmental burdens, protect public health and generate revenue. Globally, such taxes have proven effective in reducing smoking rates, alcohol-related harm, and relatively recently, consumption of foods implicated in diet-related diseases like obesity and diabetes. Usually, health taxes are levied on products such as alcoholic beverages, wines, spirits, tobacco products, carbonated drinks, energy drinks, Sugar Sweeten Beverages (SSBs), flavoured water and plastics that have negative public health impact. These taxes aim at correcting market failure for negative externalities and negative internalities.
Generally, health taxes are imposed to create win-win–win-win benefits for Ghana. The four (4) wins or benefits of the health taxes are: (1) increase health tax revenue to finance development priorities including socio-economic and health programmes, (2) reduce over consumption of products with negative health and environmental impact to improve health outcomes and productivity, (3) reduce associated health care burden and increase the long-term financial viability of health system, and (4) reduce disproportionate Non-Communicable Disease (NCD) risk in lower-income groups and increase health equity.
Consumption of unhealthy products including tobacco, alcohol, plastics, energy drinks and SSBs imposes socio-economic cost to Ghana. Ghana is facing an alarming rise in obesity, diabetes, hypertension, and cardiovascular diseases, largely driven by the excessive consumption of unhealthy products. Obesity rates in Ghana are currently skyrocketing, with 16% to 46% of children (ages 6–15) and 25% to 47% of adults (15+) classified as overweight or obese. Among women of reproductive age, obesity surged from 10% in 1993 to 40% in 2015, reaching 50% in 2022. Generally, Obesity reduces life expectancy and quality-adjusted life years. Also, over 5,000 people die annually from tobacco use (about 6,639 deaths in 2019) in Ghana. Prevalence of cigarette smoking among males is 4.8% and females 0.1%. Data shows about 9% of students aged 13-15 years use tobacco products. Again, alcohol consumption per capita reached 2.7 litres in 2016 in Ghana. Moreover, 9.4% of Ghanaian adults engage in alcohol consumption. Indeed, alcohol use disorders in Ghana was 4.1% in 2016, above the World Health Organization (WHO) Africa region average of 3.7%. Such is the extent of the risk and burden the use of alcohol poses to the overall health of Ghana’s population.
Unsurprisingly, as many as 200 health conditions (including kidney diseases, liver diseases, hepatitis, diabetes, road injuries, home injuries, violence, cancers, cardiovascular diseases, suicides, tuberculosis, and HIV/AIDS) are linked to alcohol use and consumption globally and Ghana is no exception. Alcohol consumption in Ghana is largely dominated by men: 12.7 litres per capita alcohol consumption among alcohol consuming men, and 7.3% of Ghanaian men have an alcohol use disorder. Consumption of these harmful products are the main causes of NCDs in Ghana which account for 43% of all deaths and 31% of disease burden in Ghana annually. Analysis of institutional data in Ghana suggests that several NCDs have been increasing and cardiovascular diseases account for 8.9% of institutional deaths. Furthermore, Plastic litter has been one of the most serious environmental problems in recent Ghanaian history. Ghana currently generates about 12,710 tons of waste per day at household level, out of which 14% are plastics. The problem is compounded when heavy rains wash the plastic bottles, bags, and sleeves into road side gutters and water bodies including the sea resulting in urban floods, low fish stock and health related problems.
Aside the health hazards that are associated with the consumption of the unhealthy products, there is also economic costs. The economic cost of obesity in Ghana is immense, with estimates reaching billions of Ghanaian Cedis. Studies found that overweight individuals have 75% more inpatient admissions, while those with obesity have 159% more. The cost per hospital admission rises from US$35 for healthy-weight individuals to US$78 for overweight individuals and US$132 for those with obesity which is an indication of financial strain on the government. The economic cost of alcohol consumption in Ghana includes direct spending on alcohol, as well as indirect costs like healthcare, lost productivity, accident and societal costs like violence and crime.
A study in Ghana, found that alcohol users spend an average of US$5.06 per day on alcohol, with men and those with higher incomes even spending more. Whereas the direct costs are significant, the indirect costs are harder to quantify but likely contribute significantly to the overall economic burden of alcohol consumption. Additionally, the economic cost associated with tobacco consumption is GHȻ 668 million per year equivalent to 0.2% of Ghana’s Gross Domestic Product (GDP). This according to WHO includes GHȻ 172 million in health-care expenditures and GHȻ 496 million in lost productivity. UNICEF indicates that poor sanitation costs Ghana about GHȻ 420 million annually, equivalent to US$290 million (i.e. US$12 per person per year and 1.6% of Ghana’s GDP). The increased demand and consumption of the unhealthy products is due to increased social programmes including funerals, weddings, festivals and naming ceremonies in the country in Ghana.
Ghana’s health taxes are backed by several laws and regulations including (i) Excise Duty Act, 2014 (Act 878), (ii) Excise Duty (Amendment) (No.2) Act 2023 (Act 1108), (iii) Excise Tax Stamp Act, 2013, (Act 873), and (iv) Excise Tax Stamp Regulations, 2016 (LI 2241). The Excise Duty (Amendment) (No.2) Act 2023 (Act 1108) introduced a mixed tax regime on cigarettes and cigars. The rates are 50% ad valorem of ex-factory price and specific rate of 28 pesewas per stick with Negrohead and snuff fixed at GHC 280/kg. Besides, excise tax has been introduced on electronic cigarette liquids at an ad valorem rate of 50% of ex-factory price and specific rate of 50 pesewas per millilitre with electronic cigarettes attracting 50% of the ex-factory price.
The electronic smoking devices, however, attract an excise tax rate of 50% of the ex-factory price and 50 pesewas per millilitre in line with ECOWAS Directive. Act 1108 also increased the tax rates on wines including sparkling wine to 45% of the ex-factory price and that of spirits including “akpeteshie” were as follows (1) distilled or rectified (50% of the ex-factory price), blended or compounded (50% of the ex-factory price), and “Akpeteshie” (20% of the ex-factory price). For beer and stout etc., the rate of the tax depends on percentage of local raw material used in production of the beer. If the local raw material used is less than 50% the rate is 47.5% of the ex-factory price. If the local raw material used is from 50% to 70% the rate is 32.5% of the ex-factory price and if the local raw material used is above 70% the rate is 10% of the ex-factory price. However, Cider beer attracts 47.5 % of the ex-factory price. The ad valorem rate of malt drinks also depends on percentage of local raw material used in production of the malt. If the local raw material used is less than 50%, the rate is 20% of the ex-factory price. If the local raw material used is from 50% to 70%, the rate is 12.5% of the ex-factory price and if the local raw material used is above 70%, the rate is 10% of the ex-factory price. Again, mineral water, aerated water, non-alcoholic beer, energy drinks, fruit drinks and other non-alcoholic drinks attract an ad valorem tax rate of 20% of the ex-factory whilst distilled water attract 17.5% of the ex-factory price. Finally, plastics and plastic products attract 5% of the ex-factory price. Whereas the domestic excisable products are calculated on the ex-factory price, the imported ones are computed on the CIF values.
Ghana has chalked some successes in the implementation of the health taxes. These include (1) generation of revenue totaling GHȻ 9,302.67 million (excluding GHȻ181.09 million from the plastics tax) from 2012-2024, (2) increased in prices of the unhealthy products partly attributed to the imposition of the health taxes which discourages demand and consumption of the products, (3) reduction in prevalence of some of the unhealthy products (e.g. tobacco) as data from demographic & health surveys from 12-Economic Community of West Africa States (ECOWAS) from 2010-2018 showed Ghana had the lowest tobacco prevalence rate of 4.8%, and (4) Commendation by international institutions including WHO, UNDP, IMF and World Bank for the successful implementation of the health taxes in Ghana
Despite these successes, GRA faces myriads of challenges in the administration of the health taxes. These include (1) illicit importation of the unhealthy products into the country without paying the health taxes mainly due to the porous nature of some of the borders, (2) unregulated nature of the small and medium enterprises (SMEs) producing and importing the unhealthy products as this makes it difficult to track and trace them for the health taxes, (3) inadequate sensitization and lack of trust in government to use revenue from health taxes to support health programmes, (4) involvement of some industry players in smuggling of these products, (5) involvement of some industry players in policy interference and rent seeking, (6) inadequate training, capacity building and logistics for the Excise Tax Unit staff, and (6) inability to adjust specific excise rates to inflation.
Ministry of Finance and GRA have however, come up with several policies and administrative measures to address the health tax administration challenges. These include: (1) introduction of excise tax stamps to be affixed on the excisable products by the Excise Tax Stamp Act 2013 (Act 873), (2) education of the general public on the dangers of the use of the unhealthy products and smuggling, (3) sensitization of the health taxpayers of their responsibilities to register with GRA targeting the sector associations, (4) compliance and enforcement activities by GRA Excise tax Unit to check affixing of excise tax stamps on the excisable products, (5) simplified tax registration, filing, and payment processes, and (5) payment of the health taxes using banks, GRA portal, mobile money (code *222#) and Visa Cards.
Based on the challenges faced in taxing the unhealthy products, the writer recommends (1) strengthening of Ghana’s borders with technology, logistics and personnel to curb illicit trade in these harmful products, (2) implementation of track & trace system using direct to product digital stamps to track all the harmful products whether produced locally or imported to check illicit trade in these products, (3) introduction of the hybrid tax regime i.e. specific and ad valorem on all the excisable products to discourage consumption, (4) automatic adjustment of the current specific rates for inflation to reduce erosion of the tax rates, (5) research to determine impact of the current tax regime on pricing, illicit and consumption, and (6) intensification of education by GRA and other stakeholders on the dangers associated with consumption of these harmful products as well as smuggling, and (7) that citizens download the GRA authentication app to help check illicit products on the market.
By
Dr. Alex Moyem Kombat
Assistant Commissioner of Research & Policy
Ghana Revenue Authority
