Research by global market research firm Kantar shows that almost one in every two (45.1%) of cigarettes sold in Kenya are illicit. BAT Kenya managing director Sidney Wafula speaks during the release of the tobacco industry report, in Nairobi/ HANDOUT KENYA lost an estimated Sh47 billion in excise duty and value added tax (VAT) revenue to illicit cigarette trade between 2021 and 2025, a new study by global research firm Kantar shows.
The amount is equivalent to the construction of about 48,000 low-cost houses under the affordable housing programme, the purchase of 19 million bags of subsidised fertiliser to support farmers, or 12 million bags of maize to boost food security. This, as nearly half of cigarettes consumed in the country evaded taxes.
The study, commissioned by British American Tobacco Kenya (BAT Kenya), estimates that illicit cigarettes accounted for 45.1 percent of total cigarette consumption in 2025, meaning almost one in every two cigarettes sold in the country was illegal. The findings raise concerns over the effectiveness of tax policies and enforcement measures in curbing the growing illicit market, which is increasingly competing with the regulated cigarette industry.
Illicit cigarettes are defined as products on which applicable taxes have not been paid and which fail to comply with other regulatory requirements. According to the research, the Sh47 billion in lost excise duty and VAT revenue over the five-year period could have financed significant investments under the Government’s Bottom-Up Economic Transformation Agenda (BETA).
The findings come amid mounting pressure on the government to expand its revenue collection base while financing public infrastructure and social programmes. The study also highlights the relationship between taxation and the performance of the legal cigarette industry, pointing to a 55 percent cumulative increase in cigarette excise duty between 2018 and 2022.
Over the same period, excise revenue collected from the legal cigarette industry declined by Sh1 billion, raising questions about whether higher taxes are encouraging consumers to shift towards cheaper illicit products.