Health Taxes and Domestic Revenue Mobilization in Fragile States: Simulation Evidence for Khat, Tobacco, and Sugar-Sweetened Beverages in Somalia

Background Somalia faces sustained fiscal constraints, low domestic revenue, and high out-of-pocket (OOP) payments for health, limiting progress toward universal health coverage (UHC). Health taxes—excise taxes on health‑harming products—offer a “triple dividend” by reducing consumption of harmful goods, generating predictable domestic revenue, and creating fiscal space for priority health spending. Methods We combine (i) analysis of Somalia’s current tax and revenue structure for khat, tobacco, and sugar‑sweetened beverages (SSBs) using Ministry of Finance budget execution and policy documents; (ii) findings from a nationwide household opinion survey on health taxes (n = 2,000; 2023/2024); and (iii) a partial‑equilibrium revenue simulation model for 2025–2030. We model three effective advalorem excise scenarios (10%, 15%, 20%) applied to khat, tobacco products, and SSBs, incorporating demand responses through price elasticities and a sensitivity analysis on key parameters (elasticity, pass‑through, and compliance). We also quantify the potential budget impact of earmarking 50% of incremental excise receipts for an EPHS/health promotion budget line. Results Survey results indicate broad support for health taxes (77% overall). Administrative data show that khat already contributes sizable budget revenue (US$17.15 million in FY2024), while tobacco revenue is smaller (US$3.18 million) and SSB‑related collections are minimal. Under the 15% excise scenario, simulated incremental revenue rises from US$45.5 million in 2025 to US$51.8 million in 2030, yielding US$291.7 million cumulatively (2025–2030); the 20% scenario yields US$377.3 million cumulatively. Earmarking 50% for health would generate US$22.8 million in 2025 under the 15% scenario (US$1.48 per capita), equivalent to 24.8% of the 2025 federal health budget. Evidence on khat use suggests substantial heterogeneity; daily or near‑daily chewing is concentrated among adults, with a conservative best‑estimate of 11–12% (or lower) of the adult population affected. Conclusions A broadened excise base that explicitly includes khat, alongside tobacco and SSBs, could materially strengthen Somalia’s domestic resource mobilization while advancing NCD prevention. A transparent earmarking mechanism—implemented as a health promotion surcharge or dedicated budget line—could protect priority EPHS financing, provided that legal reforms, strong tax administration, and accountability safeguards are implemented.