Screen heading: Tobacco tax study in Mauritius.
Screen caption: Study shows that higher tax on cigarettes in Mauritius would reduce consumption and increase revenue.
Inside: A REVIEW OF EXCISE TAXES ON CIGARETTES IN MAURITIUS
A study carried out in Mauritius in 2018 by the University of Cape Town and the University of Mauritius under the initiative of VISA, a local NGO engaged in tobacco control, shows how an increase in the specific excise tax on cigarettes in Mauritius would influence, amongst other things, the retail price, the total consumption of cigarettes and government revenues. The focus of the model is on improving health outcomes and raising additional government revenue in Mauritius.
Mauritius’s past experience has shown that increasing the excise tax on tobacco has been particularly effective at raising government revenues and reducing tobacco consumption. Nevertheless, tobacco consumption is still high in the country, with a smoking prevalence of 38.5% among males and 4.1% among females in 2016. Affordability incorporates the impact of both price and income as determinants of demand. The successive excise tax increases since 2012 have made cigarettes in Mauritius progressively less affordable. Nevertheless, cigarettes in Mauritius are more affordable than in many other African countries.
The tobacco industry has responded to the excise tax increases by substantially increasing the net-oftax price of cigarettes on premium and popular brands, while decreasing the net-of-tax price on economy brands. Currently, all cigarettes consumed in Mauritius are imported. The excise tax is levied as a specific excise tax of Rs 5 111 per 1000 cigarettes. In addition, a 15% VAT is levied on the VATexclusive cigarette retail price.
Given the industry’s pricing strategy that it has followed in recent years, the relatively high levels of cigarette consumption in Mauritius, and our modelling exercise, we recommend the following:
- That, given that the excise tax structure already follows international best practice (i.e. a uniform specific tax), the tax structure remains unchanged;
- That, to increase government revenue and decrease cigarette consumption, the government of Mauritius substantially increases the excise tax on cigarettes,
- That the government substantially increases the excise tax in the first year, followed by regular annual increases that will account for inflation and economic growth. Such strategy will achieve both pubic health and revenue objectives.
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