Increase ‘sin tax’ to augment NHIS – Philips Africa CEO

The struggles of the National Health Insurance Scheme (NHIS) can be alleviated temporarily should government increase taxes on products such as tobacco, alcohol and sugar, and use that revenue to supplement the scheme’s funding, Jasper Westerink, the Philips Africa CEO has said.

Known collectively as ‘sin tax’, due to the harmful effects of such products on the health of humans, Mr. Westerink – adding his voice to a growing call for such a tax, explained that with a tax hike on such products government will be generating income for insurance coverage and also discourage people from using these products due to increased prices.

“Smoking, alcohol and sugar are not healthy and so they need to be taxed,” he told the B&FT in a wide-ranging interview that also touched on how the public and private sectors can work hand-in-hand, and how Philips’ expertise can help develop Ghana’s healthcare and offer the best healthcare for citizens.

“I would be very much in favour of taxing. If you can buy and smoke a cigarette, you can also pay a little bit more and put that money aside – because later on lung-cancer or related problems will rise,” he added.

Citing examples from the developed economies, where as much as 70 percent of the price of cigarettes, alcohol and sugar are tax. He added that a special fund can be created to see how much is raised and how that income can be properly deployed to support the NHIS.

Ghana’s health insurance scheme has been in a constant struggle to stay afloat for the past decade. Regular complaints of delayed payment from public and private health facilities have seen the scheme’s debt balloon to billions of cedis – with politicians promising to do more to support the scheme.

With the scheme membership nearing 15 million, experts have argued that the National Health Insurance Levy (NHIL) – a 2.5 percent charge from VAT collected by the Ghana Revenue Authority (GRA) which does not even go to the scheme directly – is not enough to support the scheme in its current format.

According to Tobacco Atlas, a platform that tracks the impact of tobacco on economies, the economic cost of smoking in Ghana amounts to almost GHC100million in direct costs related to healthcare expenditures and indirect costs related to early mortality and morbidity.

With almost 500,000 users of tobacco in Ghana, including almost 6,000 children, more than 5,000 people die annually from tobacco-caused diseases, the data added.

The minimum World Health Organisation (WHO) benchmark for excise tax on the retail price of cigarette is 70 percent. Ghana currently imposes an excise tax of only 13.02 percent on the retail price of cigarettes, which is about 56 percent below the WHO benchmark and contributes significantly to the low price of cigarettes in the country.

Even though in July 2015 Parliament approved an increase in the ex-factory price of cigarettes from 150 to 175 percent, excise tax as a percentage of cigarette prices is considered among the lowest in the West African sub-region.

A single cigarette stick is priced between 20 pesewas to 70 pesewas in Ghana, making it very accessible to the youth. Civil society organisations and the World Health Organisation (WHO) have called for a further increase in tobacco tax, in keeping with best practices around the world.

Available data add that a dollar increase in tobacco tax would result in roughly US$141million more revenue for the government, which can go a long way to supporting the NHIS.

South Africa, in April 2017, increased its ‘sin taxes’ – to raise revenue of R5.1billion (US$406.1million) and make way for the introduction of a sugar tax on sugar-sweetened beverages later in the year.

In the United Kingdom, smokers are taxed a lot. In a 20-cigarette packet costing £7.35, some £5.37 of the cost goes to the taxman. Per packet, they currently pay tobacco duty at a rate of 16.5 percent of the retail price, as well as a further ‘flat’ element of £4.15. The result of this is that government receives a lot of money from smokers, with FullFact’s most recent research showing that they bring in about £12billion of direct tax revenues.

“Cigarettes are extremely expensive in Europe. If cigarettes are very cheap, then I would advocate for a higher tax on stuff like that,” Mr. Westerink, added.