Kazakhstan Announces Changes in Tobacco Excise Taxes

Earlier this year, the Kazakh State Revenue Committee announced various excise tax changes for tobacco and alcohol products, which will go into effect in the 2022 tax year.

Diane Caruana

May 4, 2021

An article on the World Bank Group pointed out that while the tobacco taxation policy practiced in Kazakhstan in 2003-2013 resulted in increased tobacco excise revenues, it was evidently not effective in terms of public health, as it did not lead to a decrease in cigarette consumption.

Increased tobacco excise revenues were not effective in terms of public health, as they did not lead to a decrease in cigarette consumption.

In 2014, tobacco excise taxes were drastically increased and tobacco affordability substantially reduced, and this resulted in a decline in tobacco sales and smoking prevalence in the country. However, in 2015-2019 the nation returned to a policy of moderate tax increases. The reduction in tobacco affordability in 2015 was caused not only by the excise increase but also by the tobacco industry pricing policy and a decline in incomes.

As for 2020–2021, the planned annual cigarette excise increase is of 12–14%, with an increase to 12,300 Kazakh tenge (US$29) from 11,000 tenge (US$26) per 1,000 cigarettes.

With regards to alternative products, similar to trends found across the globe in recent years, electronic cigarettes and heated tobacco products (HTPs) appeared in the local market, with the main consumers being young adults. As of 2020, HTPs and e-liquids will be taxed as follows: an increase to 11,750 tenge (US$28) from 7,345 tenge (US$17) for per kilogram of tobacco mixture for products with heated tobacco; and an increase to 8 tenge (US$0.019) from 5 tenge (US$0.001) per milliliter for nicotine-containing liquids.

E-cig taxes lead to increased smoking rates

Meanwhile, in line with findings from previous studies, a recent US study funded by the National Institutes of Health has indicated that raising taxes on e-cigarettes in an attempt to curb vaping may be counterproductive, as it just leads people to sticking or reverting back to traditional (and more harmful) cigarettes.

Titled, “The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data,” the study aimed to examine the effect of e-cigarette taxes enacted in eight US states. Using data from 35,000 national retailers between 2011 and 2017, the researchers found that for every 10% increase in e-cigarette prices, e-cigarette sales dropped by 26%. However, the same 10% increase in e-cigarette prices caused an 11% increase in traditional cigarette sales.

“We estimate that for every e-cigarette pod no longer purchased as a result of an e-cigarette tax, 6.2 extra packs of cigarettes are purchased instead,” said concerned study co-author and economist from Georgia State University Michael Pesko.

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