Tax receipts from imported tobacco drop as cigarette sales fall

Government witnessed a sharp fall in tax revenues from imported tobacco in the first half of this year with profit margins among importers dwindling as more Rwandans quit smoking.

Government witnessed a sharp fall in tax revenues from imported tobacco in the first half of this year with profit margins among importers dwindling as more Rwandans quit smoking.

Figures from Rwanda Revenue Authority (RRA) show that tax revenues from imported tobacco slid by 63 per cent to Rwf110.3 million in the first six months of this year, down from Rwf298.4 million at the same period last year.

An agent of British American Tobacco Company (BAT) told Business Times that with more members of the public quitting smoking, in most cases, due to religious beliefs, cigarette revenues gradually dropped over the last couple of years.

“Sales have declined significantly, 400 churches explains it all. Many people are changing to born again Christianity,” observed James Rudasingwa, a distributor of BAT products.

Rudasingwa added that initially, he used to distribute between seven and ten cartons of premium tobacco of DUNHILL per week in Nyarugenge and Kicukiro districts. This is equivalent to 350 and 5,000 sticks of cigarette.

He said sales had dropped to between three and five cartons weekly.

Weekly sales of Intore, the most popular brand on the local market, fell from between 175 and 200 cartons to 120 cartons, he added.

“Many retailers have terminated their contracts to trade in tobacco and this has brought us problems with our suppliers that we do not perform,” Rudasingwa said, adding that some supermarkets have turned down the offer to distribute tobacco products because of religious belief as well as little profit margins.

 A former smoker, who preferred anonymity, shared his experience, saying that gone are the days when smoking was considered prestigious and cool.

“Today, smoking is out of fashion. There is stigma especially in public places where everyone turns his head and requests you to leave and free them from smoke,” he said.

Lawmakers are on the verge of passing a bill forbidding smoking in public places to mitigate illnesses caused by passive smoking.

To tobacco dealers, this means lower revenues hence a drop in profit margins. Yet for treasury, it is likely to translate into even less tax receipts.

“With over 15 years in business, it has become tough and we may also surrender and look out for other business opportunities,” Rudasingwa stated.

BAT manufactures three cigarettes brands in the country including DUNHILL, Intore, Impala and Sweet Menthol (SM) Premium. Among most brands, a stick of cigarette costs an average of Rwf25.

Meanwhile, government also faces declining tax revenues from imported alcoholic beverages, including beer, wine and liquors.

In the period under review, tax revenues from imported alcohol products declined to Rwf2 billion, down from Rwf34.5 billion.

Mark Mugarura, the marketing manager of BMC, the manufacturer of SKOL beer said imported alcohol products are facing strong competition from local producers.

“We all compete for the same consumers, and the local brewing market has grown so fast and strong,” Mugarura said in a phone interview.

Rwanda has two major suppliers of tobacco, BAT and a local manufacturer—Premier tobacco, while the country’s alcohol market is mainly dominated by Bralirwa, BMC, and East African Breweries.

 

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