The Impact of Tobacco Taxes in Kenya on the Decision to Smoke and Long Term Health Outcomes

Introduction Objective: Tobacco use causes severe diseases that can lead to premature deaths. However, those who stop smoking are likely to recover a better health in the years that follow cessation and later in life, and the rapidity of smoker’s recovery generally increases when they stop at younger ages. Tax policy aimed to significantly reduce the affordability of tobacco products is the most effective policy tool to encourage cessation and therefore to improve health status of quitters both in the short term and later in life. This paper analyzes tobacco tax reforms enacted in Kenya up to 2017 and empirically evaluate the effectiveness of tax and price changes over time to reduce tobacco use and improve health outcomes, especially among vulnerable groups, and for quitters or starters, due to changes in affordability. We also evaluate the ability of policies aimed to reduce illicit trade to improve the efficiency of tobacco taxation. Methods We use individual data from the 2014 GATS and combine them with external data on tobacco taxes, prices, and policies. We trace the smoking history of current or past smokers to link the change in the affordability of tobacco products to their smoking decision. We use propensity score matching to match each smoker to a non-smoker in order to identify the causal effect of tax changes to the decision to smoke from a robust group of counterfactuals. Results We show that changes in both the design and tax rates in Kenya up to 2015 have had little impact on tobacco use and health outcomes on average. However, we find evidence that administrative efforts to simultaneously strengthen the tax system have strengthened the efficiency of tax policy, especially for most vulnerable groups. Conclusions We evaluate recent reforms in the tax system and tax administration and provide recommendations. Funding This research is funded by Bloomberg Philanthropies and the African Capacity Building Foundation (ACBF).