The 2017/2018 Budget is in its final stages of preparation before Parliament. As usual, a range of tax measures have been proposed in the Budget with an aim of increasing domestic revenue. Statistics show that every new fiscal year has witnessed a rise in taxes on alcoholic and tobacco products. Taxes help to achieve increases in revenue to finance government priority expenditures, and are also a disincentive to consumption of harmful products. These two objectives can be achieved simultaneously.
In Uganda, however, experience shows that irrespective of increasing taxes, consumption of these products has not reduced significantly.
This is attributed to the fact that demand for these products does not highly respond to prices (inelastic demand). This presents an opportunity for government to increase revenues to fund priority areas through this form of taxation. Indeed, the alcohol industry is one of the big revenue earners for Uganda.
However, beyond raising revenue, we must be concerned about the long-term negative consequences of non-declining consumption of these products particularly on people’s health, healthcare needs, and cost of providing health services. For example, the International Agency for Research on Cancer (IARC), indicates that alcohol consumption is highly associated with different types of cancers, including colorectum, larynx, liver, esophagus, oral cavity, pharynx and female breast.
Alcohol is also highly associated with pancreatic cancer.
In fact, the IARC shows that up to 3.6 per cent of all cancer cases and 3.5 per cent of cancer deaths globally, are attributable to alcohol consumption. Even consumption as low as one drink per day causes significant risks of these cancers.
Cancer is currently among the main causes of ill-health and deaths in Uganda, and there are public concerns about access to cancer treatment services.
The cost of cancer, both treatment expenses, productivity loss, as well as cost of mortality and morbidity, is high and any attempts to address the associated risk factors would be critical. For example, the Center for Tobacco Control in Africa (CTCA) and Makerere University School of Public Health, recently estimated the total annual cost of tobacco smoking in Uganda to be Shs441b in care costs, mortality, and morbidity, Shs147b in treating tobacco attributable illnesses, Shs420b in annual indirect mortality costs, and Shs225.5b in annual indirect morbidity costs. This is for tobacco-related cancers alone.
Alcohol and tobacco consumption-related effects result from activities outside the health sector, but once they become medical, the health sector must address them. While these activities are among the main sources of revenue to government, the health sector that bears the ultimate effect of the same, does not commensurately benefit from allocations from this revenue. The 2013 National Health Accounts indicated that only 15.3 per cent of funding for health came from government, 38.4 per cent from private sources and 46.5 per cent contributed by development partners.
The funding gap in the health sector has been imminent coupled with a perennial challenge of over-relying on donor/external support.
This may not be sustainable in the long-term. Alternative strategies for increasing funding for health must be sought. The starting point is increasing government revenue that would ultimately secure additional resources for priority sectors.
However, these additional resources may not guarantee increased allocations to health. It is my considered view that tax revenue from alcohol and tobacco products and related consumption activities should directly be allocated to the health sector without necessarily being subjected to the politics involved in the budgeting process. This is because significant costs of managing consequences of alcohol and tobacco consumption such as cancers, are majorly borne by the health sector.
These resources would be directed towards cancer awareness campaigns, treatment, as well as facilitating campaigns to reduce consumption of these products.
Mr Mayora is a health economist with SPEED – Makerere University School of Public Health