Response of legal and illegal cigarette prices to a tax increase in Ethiopia

Abstract

BackgroundIn 2020, Ethiopia passed a landmark tax proclamation implementing an evidence-based mixed excise system aimed at curbing tobacco use. This study evaluates the impact of the tax increase of more than 600% on both legal and illegal cigarette prices in order to gauge the impact of the tax reform in the presence of a sizeable illicit cigarette market.MethodsData on 1774 cigarette prices were obtained from retailers during Empty Cigarette Pack Surveys in the capital and major regional cities conducted in 2018 and 2022. Packs were categorised as ‘legal’ or ‘illicit’ using criteria from the tobacco control directives. Descriptive and regression analyses were used to study the cigarette price changes during the period of 2018–2022, capturing the impact of the 2020 tax increase.ResultPrices of both legal and illegal cigarettes increased in response to the tax increase. In 2018, the stick prices ranged from ETB0.88 (Ethiopian birr) to ETB5.00 for legal cigarettes while they ranged from ETB0.75 to ETB3.25 for illegal ones. In 2022, a legal stick sold for ETB01.50–ETB2.73 and an illegal stick for ETB1.92–ETB8.00. The average real price of legal and illegal brands increased by 18% and 37%, respectively. The multivariate analysis confirms that prices of illicit cigarettes grew faster compared with the legal ones. By 2022, illicit brands were on average more expensive compared with their legal counterparts. This result is statistically significant at p<0.01.ConclusionThe prices of both legal and illegal cigarettes increased following the 2020 tax increase, with the average real cigarette price increasing by 24%. As a result, the tax increase likely had a positive impact on public health despite a sizeable illicit cigarette market.

Tobacco industry corporate social responsibility activities and other interference after ratification of a strong tobacco law in Ethiopia

“…[60][61][62] Furthermore, data on cigarette prices in Ethiopia show that, despite price rises in both legal and illicit products following the excise tax modification in 2020, the price of legal products remains lower than the price of illicit cigarettes. 63 This implies that factors other than tobacco tax drive the illicit tobacco trade in Ethiopia. Despite a robust tobacco control legal framework in Ethiopia, our findings demonstrate challenges persist in implementation.…”