Ghana’s tobacco tax reforms are beginning to produce strong results, with new evidence showing that higher excise taxes could significantly boost government revenue while reducing smoking and easing the country’s long-term public health burden.
At a policy dialogue on tobacco taxation, Dr Michael Boachie, a consultant from PRICELESS SA at the School of Public Health, Wits University in Johannesburg, said Ghana’s recent reforms marked an important shift in the country’s approach to tobacco control and domestic revenue mobilisation.
Central to the reforms is the Excise Duty Amendment Act, 2023 (Act 1108), which introduced a hybrid tax system combining a 50 per cent ad valorem tax with a specific excise duty of GH¢0.28 per cigarette. The law also established a minimum tax floor aimed at reducing tax avoidance and improving revenue collection.
According to data presented at the forum, tobacco excise revenue rose from about GH¢176 million in 2022 to a projected GH¢713 million in 2025. This represents an increase of more than 300 per cent over the reform period.
Analysts at the dialogue argued that the figures demonstrate the potential of tobacco taxation as a reliable domestic revenue source, especially at a time when government is under pressure to strengthen public finances without overburdening productive sectors of the economy.
Dr Boachie noted that the current gains could represent only the beginning if government adopts stronger measures. Recommendations discussed at the forum included increasing excise taxes to at least 70 per cent of the retail price and introducing a minimum specific tax of US$2 per pack.
Simulation studies presented during the discussions suggested that more aggressive tobacco tax policies could increase revenues by as much as 627 per cent in some scenarios, even as cigarette consumption declines.
“Revenue does not fall when consumption declines; demand inelasticity ensures revenues continue to rise,” Dr Boachie explained.
The findings also challenged long-standing arguments from the tobacco industry that higher taxes encourage smuggling and reduce government revenue through declining legal sales.
Experts at the forum argued that illicit tobacco trade is driven more by weak enforcement systems and governance gaps than by tax rates themselves. They pointed to countries that have successfully combined higher taxes with stronger monitoring systems such as tax stamps, track-and-trace technology and coordinated law enforcement measures.
The dialogue further addressed concerns that tobacco taxes unfairly affect low-income consumers. Analysts explained that while poorer households spend a larger share of their income on tobacco products, they are also more likely to reduce consumption or quit smoking when prices rise.
“Taxation is not punitive; it is protective,” Dr Boachie said, stressing that the long-term health and financial benefits are often greatest among lower-income groups.
Policy experts are now calling on government to build on the gains made under Act 1108 by strengthening the broader tobacco tax system. Key recommendations include adjusting excise taxes regularly to reflect inflation and income growth, simplifying the tax structure to reduce manipulation, and improving coordination among the Ministry of Finance, Ministry of Health, Parliament, the Ghana Revenue Authority and law enforcement agencies.
There is also growing support for allocating part of tobacco tax revenue directly to healthcare and non-communicable disease interventions. Advocates believe this could help strengthen public support for future tax reforms while addressing the health costs associated with tobacco use.
Despite continued resistance from the tobacco industry through lobbying and pricing strategies aimed at keeping cigarettes affordable, experts at the dialogue said the evidence increasingly supports stronger taxation policies.
They argue that properly designed tobacco taxes can simultaneously reduce smoking rates, improve public health outcomes and generate substantial government revenue.
For Ghana, tobacco taxation is increasingly being viewed not only as a public health measure, but also as a critical fiscal reform tool capable of supporting long-term national development goals.
