Tobacco company, BAT, warns of rising illicit cigarette trade, as govt finalizes 66% tax hike

British American Tobacco (BAT) Zambia has warned that aggressive increases in excise duty on cigarettes risk fuelling illicit trade, undermining government revenue and public health objectives.

BAT Zambia Managing Director, Mukubesa Maliande, revealed that internal estimates show the illicit cigarette market in Zambia nearly doubled from 12 percent in 2024 to around 23.8 percent following an earlier excise hike this year.

In a statement issued on Saturday, Maliande cited Ministry of Finance figures indicating that the government is currently losing an estimated US$50 million annually in revenue due to illicit cigarette sales.

He stressed that the current excise levels, which saw a 13 percent increase in January, were already sufficient to support the government’s revenue targets while sustaining legitimate businesses and safeguarding jobs.

Maliande warned that any further mid-year tax increases could trigger unintended consequences, including a surge in illicit trade and heightened financial pressure on consumers already burdened by high inflation.

“This would ultimately defeat the intended objectives of excise policy and public health interventions,” he cautioned.

He instead advocated for a more progressive and predictable fiscal framework, urging authorities to prioritise regulatory enforcement and improved tax compliance to curb revenue leakages.

“These measures, rather than sharp tax increases, would better align with the government’s economic ambitions while protecting both the industry and consumers,” he said.

Meanwhile, Maliande called on the government to reconsider a proposed 66 percent increase in excise duty on cigarettes. The tax hike is scheduled for parliamentary debate following the announcement of a supplementary budget aimed at raising K33.6 billion.

The proposal would see cigarette excise duty rise from K452 to K750 per mille — the highest increase the sector has seen to date.

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