Appraisal of Kenya's excisable goods management system using interrupted time series analysis: A case of cigarettes and cigars excise tax revenue

Abstract

The government of Kenya introduced the Excisable Goods Management System (EGMS) in November 2013, which is a form of Track and Trace Systems (TTSs) for excisable goods, including cigarettes and cigars. This study appraised the EGMS with a focus on its impact on cigarette and cigars excise tax revenue and possibly control of related illicit trade in Kenya. Illicit trade in cigarettes and cigars pose significant health risks owing to increased access to tobacco products, besides contributing to loss of government revenues. The study utilised an Interrupted Time Series Analysis (ITSA) to assess impacts of the EGMS on monthly cigarette and cigars real excise tax revenue over the period April 2013 to March 2017. The results show that the difference between the pre-intervention and post-intervention slopes of the real excise tax revenue was positive and statistically significant, suggesting a change in excise tax revenue trends. The hypothesis of an immediate level change in excise tax revenue was however not supported, possibly due to the initial implementation challenges that dampened a ‘jump’ in real excise tax revenue. These findings suggest that TTSs need to be complemented by sustained efforts to achieve maximum compliance levels and impact in both the short term and the long term.