1. Raising Tobacco taxes to
reduce smoking
prevalence in Ethiopia
The Economics of Tobacco Control
313.685.8120
BY: Bineyam Gebrewold
SUBMITTED TO: Dr. Hugh Waters
Johns Hopkins Bloomberg School of Public Health
December 18, 2015

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Bineyam Gebrewold The Economics of Tobacco Control 313.685.8120 December 2015
Raising Tobacco taxes to reduce smoking prevalence in Ethiopia
Ethiopia is located in east Africa, bordered on the west by the Sudan, the east by Somalia
and Djibouti, the south by Kenya, and the northeast by Eritrea. It is the second-most populous
country in Africa with a population of 96.5 million in 2014. With an area of 1,126,829 km² the
country is about twice the size of France or the state of Texas.i
In Ethiopia 7.7 % of men and 1 % of women smoke cigarettes each day, which is among the
lowest in developing countries but a tangible evidence of an ongoing and dire public health
threat. Moreover about 1.5% of the adult population uses smokeless tobacco. According to the
National Tobacco Enterprise of Ethiopia (NTE), there is no defined legal smoking age in the
country. The smoking rate among minors is 2.5% for boys and 0.7% for girls which is a very
alarming trend since 50% of the total population is under 15 years of age.ii Every year more than
9600 Ethiopians (1.9% of men and 0.8%of women) are killed by tobacco-caused disease, while
more than 100,000 children and more than 2.3 million adults continue to use tobacco each day.iii
A study by Lakew and colleagues pointed out that the low smoking prevalence in the
country is not enjoyed proportionally in all regions. Their study has demonstrated some regional
states, namely Gambella, Harari, Dire Dawa, Afar and Somali needing special attention because
of their higher prevalence of tobacco use. A common aspect shared by all this regions is their
proximity to the boarders making them vulnerable to contraband cigarettes. The same study has
also revealed a statistically significant association of increased tobacco use in people who are in
poorest wealth quintile, older age groups, unemployed, experienced child death, and belonging to
Islam or Catholic religion. The study underscored the importance of considering these factors in
the development of specific public health interventions targeting these regions and population. iv

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Bineyam Gebrewold The Economics of Tobacco Control 313.685.8120 December 2015
A recent article by Dr. Ashall, professor of Medicine in Addis Ababa University argued that
Ethiopia is among the few countries that evaded the global tobacco plague and can maintain its
low smoking prevalence or even reduce it further with aggressive measures at many levels. But
that will not happen with the current policy that is shying away from utilizing higher taxes in
tobacco products to influence the consumer behavior at large. The article pointed out the
magnitude of the current threat posed by NTE, the government owned tobacco enterprise that
monopolized the production and distribution of tobacco products in the country. NTE recently
installed a highly sophisticated equipment capable of producing 12, 000 cigarettes and 500
packets under a minute in an effort to flood the market with tobacco products with attractive
prices.v
As indicated by Dr. Waters on lecture 3, tobacco control policy is an excellent investment in
the health of a country's population.vi Based on a recent WHO estimates, for less than a nickel
per person per year Ethiopia will be able to pay for all inclusive tobacco control policy to include
raising tobacco excise taxes, enforcing a comprehensive national smoke-free law, a ban on
tobacco advertising and promotion, and mandating graphic warning labels on tobacco product
packaging. The report underscored through this seemingly small investment the country will be
able to reap enormous dividends in population health and prosperity.vii
Despite the current low rates, smoking prevalence has been on the rise in Ethiopia even after
the fact that the nation has ratified WHO’s Framework Convention on Tobacco Control in
January 2014.The nation’s commitment to this treaty was further evidenced by the passage of
important tobacco control proclamations that included prohibition of sells to minors and smoking
in public places, and advertisement of cigarettes and tobacco products that went to effect in June,

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Bineyam Gebrewold The Economics of Tobacco Control 313.685.8120 December 2015
2014. viiiHowever the effort to reduce the prevalence will not be successful without the
introduction of multi-faceted approaches including rising tobacco taxes.
According to the report by WHO global Tobacco epidemic, Ethiopia has been identified as
one of the 15 countries with lower tobacco taxes having less than 20% of total taxes.ix However
the issue of raising tobacco taxes which has a great potential to reduce smoking prevalence has
not been seriously considered by the government until recently.
The issue of raising tobacco taxes which is the focus of this paper and controlling illicit
brands are some of the measures Ethiopian policy makers are shying away from. Both have been
adopted by many countries in the world as the most effective way of reducing smoking
prevalence, especially in children and youth. Many countries have achieved substantial
reductions in smoking rates through tax increases. Several researches indicate that for every 10%
increase in price of cigarettes due to taxes, there is a minimum of 5% drop in tobacco
consumption.
However, in the WHO Report on the Global Tobacco Epidemic 2015: Raising Taxes on
Tobacco, Ethiopia was one of only 15 countries that had less than a 20% share of total taxes of
retail price of its most widely sold cigarette brand Nyala. The retail price of this most sold brand,
in pack of twenty cigarettes, is 12.00 ETB. The total taxation of this brand is 50.3 % of the retail
price. The annual tax revenues from tobacco products for the year 2011 (including excise tax,
value added tax and import duties) totaled a little more than 639 million ETB. x
In 2013 the Human Rights and Tobacco Control Network (HRTCN) requested that Ethiopia
needs to address five crucial recommendations along with its effort to ratify the Framework
Convention on Tobacco Control. Among this crucial recommendations stated by HRTCN is the
issue of increasing tobacco excise taxes with effective implementation, including tax stamps and

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Bineyam Gebrewold The Economics of Tobacco Control 313.685.8120 December 2015
decreasing tobacco product smuggling.xiThey further advise that portion of the tax revenue
generated could be used to support tobacco control activities regionally and nationally.
Considering the greater importance of the aforementioned public health threats, policy gaps
and recommendations by the international tobacco control network, I will argue against the
current tobacco taxing scheme in Ethiopia supporting legislation to increase taxes on all tobacco
products in the nation. According to a study by Abedian and his colleagues, there is a concrete
evidence from countries at all income levels that taxation of cigarettes is highly effective in
reducing consumption. They further argued the existence of a strong economic rationale for
governments to use fiscal policy to reduce smoking that will lead to improved health status and
economic productivity at both the individual and national level.xii. According to the lecture by
Dr. Waters, the effect of tobacco tax and price increase on decision to smoke or not to smoke and
number of cigarettes consumed is measured by elasticity of the demand for cigarettes with
respect to price. He explained that a 10% price increase in tobacco products will result in a
consumption decrease of -8%, approximately, in low and middle-income countries.xiii Moreover
similar study conducted in Mexico by Jiménez and colleagues revealed that a 10% increase in
the tax as a percentage of the price results in a 12.4% increase in the price to consumers, reduces
consumption by 6.4% and increases the revenue from cigarette taxes by 15.7%xiv
Yi-Wen, an economist from Taiwan stated that cigarette taxation is becoming more widely
used by many countries as a means of discouraging their populations from smoking. xv Another
study done by Van Baal revealed that increasing the price of cigarettes would not only have
positive effects on youth smoking behavior, but also on the smoking behavior of older
individuals xvi In addition, cigarette prices were found to have a positive and statistically

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Bineyam Gebrewold The Economics of Tobacco Control 313.685.8120 December 2015
significant effect on quit rates. Individuals aged 30-39 years and 40- 64 years were less likely to
quit smoking compared with individuals aged 18-29 years.xvii
In conclusion, Ethiopia will greatly benefit from introduction of a tobacco control policy
that focuses on raising the current low tobacco tax to discourage smoking behavior among the
youth that has been targeted by the tobacco industry. Moreover it will also help to reduce
consumptions in the hard to quit adult population and provide the government with ample
revenue to engage in other tobacco control activities that eventually bring greater utility in terms
of health outcomes and economic gain at individual and national level.
i http://www.worldbank.org/en/country/ethiopia/overview Available December 17, 2015.
ii http://www.tobaccoatlas.org/country-data/ethiopia/ Available December 17, 2015.
iii http://www.tobaccoatlas.org/country-data/ethiopia/ Available December 17, 2015.
iv Lakew, Y and Haile, D. Tobacco use and associated factors among adults in Ethiopia: further
analysis of the 2011 Ethiopian Demographic and Health Survey. BMC Public Health 2015 5:487
DOI: 10.1186/s12889-015-1820-4
v Frank Ashall. Ethiopia: Behind the Smokescreen of Ethiopia's Surging Tobacco Production.
Accessed at http://allafrica.com/stories/201510081086.html available December 17, 2015.
vi Hugh Waters. The Economics of Tobacco Control Lecture 3, JHSPH, Fall 2015.
vii http://www.tobaccoatlas.org/country-data/ethiopia/ Available December 17, 2015.
viii http://www.tobaccoatlas.org/country-data/ethiopia/ Available December 17, 2015.
ix http://www.tobaccoatlas.org/country-data/ethiopia/ Available December 17, 2015.

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Bineyam Gebrewold The Economics of Tobacco Control 313.685.8120 December 2015
x Frank Ashall. Ethiopia: Behind the Smokescreen of Ethiopia's Surging Tobacco Production.
Accessed at http://allafrica.com/stories/201510081086.html available December 17, 2015.
xi Human Rights and Tobacco Control Network Submission to the Committee on Economic,
Social and Cultural Rights Pre-Sessional Working Group, 47th Session, 5-9 December 2011.
Available at
https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#
accessed December 17, 2015
xii Abedian I, Van der Merwe R, Wilkins N, Jha P, eds. The economics of tobacco control:
towards an optimal policy mix. South Africa: Applied Fiscal Research Centre, Cape Town
University, 1998.
xiii Hugh Waters. The Economics of Tobacco Control Lecture 3, JHSPH, Fall 2015.
xiv J A Jiménez-Ruiz, B Sáenz de Miera, L M Reynales-Shigematsu, H R Waters,M Hernández-
vilaThe impact of taxation on tobacco consumption in Mexico Tob Control 2008;17:105-
110 doi:10.1136/tc.2007.021030
xv Yi-Wen Tsaia, e,*, Chung-Lin Yanga, Chin-Shyan Chenb, c, Tsai-Ching Liud, c and Pei-Fen
Chena. The effect of Taiwan’s tax-induced increases in cigarette prices on brand-switching and
the consumption of cigarettes
xvi Van Baal P, Brouwer W, Hoogenveen RT, Feenstra TL. Increasing tobacco taxes: a cheap tool
to increase public health. Health Policy 2007; 82:142-52.
xvii G.A. Franz, Price effects on the smoking behavior of adult age groups. Public Health. 2008
Dec; 122(12):1343-8. doi: 10.1016/j.puhe.2008.05.019. Epub 2008 Oct 25.