Poster #45 - Examining the Impact of Tobacco Tax Reform in Ghana: Fiscal and Public Health Implications

• In Event: Saturday Poster Luncheon

Abstract

Introduction/Background:
Tobacco use imposes significant health and economic burdens on Ghana, claiming over 6,600 lives annually. Despite its proven effectiveness, tobacco taxation in Ghana has traditionally relied on a uniform ad valorem structure, which is vulnerable to manipulation and generates suboptimal revenue. Our preliminary analysis provided enough evidence which led to the government to modify the tax structure in 2023. However, in response to international guidance—particularly the ECOWAS and WHO directive—this study evaluates the potential fiscal and public health outcomes of transitioning to a robust mixed or a specific excise tax system on cigarettes in the long term.

Purpose/Research Question:
By modeling the price elasticity of demand for tobacco, this research investigates whether modifying Ghana’s tobacco excise tax structure can simultaneously increase government revenue and reduce tobacco consumption, prevalence, and smoking-related mortality.

Methods:
We employed a cross-sectional design, collecting primary price data on cigarettes from 2,287 vendors, small shops, and large retail outlets across three zones of Ghana (northern, middle, and southern). Using this data, we simulated the impact of four alternative tax scenarios: a higher ad valorem rate, a uniform specific tax, a mixed system (specific + ad valorem), and a hybrid model reflecting ECOWAS recommendations. Simulations estimated changes in retail price, government revenue, consumption levels, and mortality over a two-year period.

Results/Findings:
Results indicate that transitioning to a mixed or specific excise tax substantially increases retail cigarette prices, reduces consumption, and enhances fiscal outcomes. A mixed system (50% ad valorem + 28 pesewas per stick) closely mirrors Ghana’s new 2023 tax regime and aligns with our simulated Scenario 3. This scenario predicted increased government revenue (in both GHS and USD) and notable reductions in cigarette consumption and smoking-related deaths. However, specific taxes are susceptible to inflation, which may erode their effectiveness over time if not adjusted.

Conclusion/Implications:
The findings support a strategic shift from ad valorem to a robust mixed or specific excise taxes as a tool for improving both public health and fiscal performance in Ghana. Effective implementation requires enhanced administrative capacity and political will. Our results contribute to broader regional and global efforts to reform tobacco taxation as a public policy lever for sustainable development. Future research should explore inflation-indexing of specific taxes and the long-term behavioral responses of consumers and importers.

Author

• Christian Kwaku Osei, University of North Carolina at Chapel Hill
  Presenting Author