Kenya is pressing for a coordinated regional approach to tobacco taxation, as widening differences in excise duties across East Africa create incentives for cigarette smuggling and threaten efforts to raise revenue and reduce tobacco consumption.
Consumer protection organisations say disparities in tobacco taxes have created a lucrative form of cross-border arbitrage, allowing traders to source cheaper cigarettes in countries with lower duties and move them illicitly into higher-tax markets.
The National Taxpayers Association (NTA) and the Kenya Tobacco and Nicotine Tax Coalition are calling on East African Community member states to harmonise tobacco taxes, arguing that unilateral increases in Kenya will have limited impact unless neighbouring countries adopt comparable measures.
“Without regional tax harmonisation, illicit trade will continue to thrive because smugglers will always follow the lowest-tax route,” NTA chief executive Patrick Nyangweso said.
The campaign comes as Kenya considers sweeping changes to its tobacco tax regime amid parliamentary debate over the Finance Bill 2026 and the Tobacco Control (Amendment) Bill 2024.
The proposed regional framework would cover Uganda, Tanzania, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo, with the aim of narrowing tax gaps that make cross-border tobacco trafficking profitable.
The NTA is proposing that Kenya raise the excise duty on cigarettes from the current Sh4,100 per 1,000 sticks by 30 per cent annually for five years, taking the rate to approximately Sh15,124 per mille by 2029.
It also wants tobacco taxes automatically adjusted in line with inflation and income growth, arguing that periodic increases are necessary to preserve their purchasing-power value.
“Despite the 2024 uniform excise rate of Sh4,100 per mille, the Tobacco Economics Scorecard fell to 1/5 in 2024 — the lowest since 2018,” Mr Nyangweso said, attributing the decline to the failure to adjust taxes adequately for inflation and the relatively low tax share.
Kenya currently collects tobacco taxes equivalent to about 30.6 per cent of the retail price, substantially below the World Health Organisation’s recommended benchmark of 75 per cent.
Public health advocates maintain that higher tobacco taxes are among the most effective measures for reducing consumption while generating additional government revenue.
The economic case for stronger tobacco controls is also significant. Industry and public health estimates cited by the associations put annual tobacco-related deaths in Kenya at about 12,000, with smoking linked to cancers, cardiovascular diseases and chronic respiratory conditions.
The wider economic cost is substantial. In 2021, tobacco use was estimated to have cost Kenya between $544.4 million and $756.2 million annually through healthcare expenditure, lost productivity and reduced household incomes.
Yet the proposed tax reforms also confront the livelihoods of thousands of tobacco farmers, particularly in Migori, Homa Bay, Bungoma and Kisumu counties.
To cushion farmers from the effects of declining tobacco demand, the NTA is proposing a Tobacco Transition Fund financed by one per cent of annual tobacco excise revenue.
The fund would support farmers moving into alternative enterprises, including sunflower, soya, sorghum and horticulture, while financing agricultural extension services, certified seeds, cold-chain facilities and market access during a five-year transition.
But the organisations argue that tax increases will succeed only if accompanied by stronger enforcement. The NTA is calling for the full deployment of the Excisable Goods Management System across tobacco manufacturing facilities and points of entry, alongside the creation of a dedicated multi-agency task force bringing together the Kenya Revenue Authority, the police and the Anti-Counterfeit Authority.
It is also urging Kenya and its EAC partners to implement the World Health Organisation’s Protocol to Eliminate Illicit Trade in Tobacco Products.
The organisation argues that stronger enforcement, rather than lower taxes, is the more effective response to illicit trade. Tobacco companies have traditionally warned that steep increases in excise duties can make legal cigarettes unaffordable and push consumers toward the black market.
The NTA and its allies reject that argument, saying weak enforcement and large differences in regional tax structures provide the stronger incentives for smuggling.
The policy debate is also expanding beyond conventional cigarettes. East Africa is experiencing rapid growth in newer nicotine products, including electronic cigarettes and nicotine pouches, particularly among younger consumers.
The NTA says some of these products remain taxed at only a fraction of the rates applied to conventional cigarettes, creating what it describes as an affordability gap. It wants taxation of novel nicotine products brought closer to cigarette-equivalent levels.
The Tobacco Control (Amendment) Bill 2024, sponsored by nominated Senator Catherine Mumma, proposes to broaden the legal definition of tobacco products to cover emerging nicotine products while strengthening advertising restrictions and health-warning requirements.
The NTA says the proposed legislation presents Kenya with an opportunity to address public health, illicit trade and domestic revenue mobilisation within a single policy framework.
“Kenya stands at a crossroads,” the association said. “Novel nicotine products are surging, youth exposure is increasing, illicit trade is at record levels, and the country faces a fiscal deficit requiring domestic revenue mobilisation.”
The association is also seeking tighter controls on tobacco marketing, including a ban on nicotine advertising on social media and restrictions on influencer campaigns aimed at people younger than 25.
It wants the sale of single cigarettes, which remains widespread despite existing restrictions, prohibited altogether.
Beyond taxation and enforcement, the NTA is calling for greater accountability over tobacco-related revenues.
It proposes that at least five per cent of tobacco excise collections, estimated by the association at about Sh780 million a year — be ring-fenced for a Tobacco Control Fund.
The money would support cancer treatment infrastructure, smoking-cessation programmes and public health campaigns. The proposal includes financing three regional cancer treatment and radiotherapy centres in Kisumu, Mombasa and Nakuru.
The campaign has also revived questions surrounding the long-delayed Solatium Compensation Fund, established under Kenya’s tobacco-control framework to support rehabilitation and public health programmes.
The NTA is calling for tobacco manufacturers and importers to begin making the mandatory two per cent Solatium contribution immediately, with penalties imposed on companies that fail to comply.
For Kenya, the challenge is no longer simply how much to tax tobacco.
It is whether the country can persuade its neighbours to narrow the tax differences that make illicit trade profitable, while ensuring that higher taxes translate into healthier communities, stronger public revenues and a managed transition for farmers whose livelihoods have long depended on tobacco.