# Making cigarette taxes more effective in Mozambique: A simulation analysis using the Tobacco Excise Tax Simulation Model (TETSiM)

## TL;DR

The paper explores how increasing cigarette taxes in Mozambique could reduce smoking and boost tax revenue.

## Contribution

The study introduces a simulation model to evaluate the impact of different tax scenarios on smoking and revenue in Mozambique.

## Key findings

- Scenario 2 leads to the highest tax revenue increase of 173% by 2028.
- Smoking prevalence could drop to 8.08% under the most aggressive tax scenario.
- Total tax share could rise to 53.9% with appropriate tax adjustments.

## Abstract

Cigarette price tax shares in Mozambique are among the lowest in Southern Africa. The excise tax share of the price of the most-sold brand is 14.7%, and the total tax share is 28.5%. The average excise tax share for the Southern African Development Community is 36.7% and the average total tax share is 51.6%. We used the Tobacco Excise Tax Simulation Model (TETSiM), to simulate the impact of a substantial cigarette excise tax increase on prices, tax shares, consumption, tax revenue, and smoking prevalence, between 2023 and 2028. We simulated three scenarios. Scenario 1 assumes that the cigarette excise tax adjustments are as stipulated in the Excise Tax on Specific Products Law for 2023–2025, and then increase by 4% annually between 2026 and 2028. Scenario 2 proposes that the excise tax increases by the sum of inflation, income growth, and an additional 30%, annually. We assume full tax pass-through for both scenarios 1 and 2. In scenario 3, we use the same annual tax adjustments as scenario 2, but assume tax over-shifting for imported and most-sold brands. Our findings indicate that, by 2028, the excise tax share decreases from 14.7% to 13.9% in scenario 1, but increases to 40.2% in scenario 2, and to 35.8% in scenario 3. The total tax share drops from 28.5% to 27.7% in scenario 1, but increases to 53.9% in scenario 2, and to 48.1% in scenario 3. Smoking prevalence is expected to drop from 9.80% to 9.77% in scenario 1, to 8.23% in scenario 2, and to 8.08% in scenario 3. Scenario 2 results in the highest expected total tax revenues (173% increase). The study provides insights on the importance of appropriately revising cigarette tax policies in Mozambique. Substantial tax increases will contribute to a healthier population and a more sustainable fiscal landscape.