'Mind-boggling': tobacco firms hit back on proposed 100% tax hike
Oct 29, 2020
A notable tax increase on tobacco products could reduce pressure on SA's heavily burdened health system, contribute positively to the country's revenue and force smokers to 'think twice' before smoking, say health organisations.
Smoking sin taxes should increase by 100%.
So say some health organisations — under the #protectournext banner — who believe this could reduce pressure on SA's heavily burdened health system, contribute positively to the country's revenue and force smokers to “think twice” before smoking.
“A significant increase in tax can make tobacco products less affordable, reducing consumption, improving public health, reducing the already heavy burden on the health system and adding to state revenue,” said the National Council Against Smoking (NCAS), CANSA, the South African Medical Research Council (SAMRC) and the Heart and Stroke Foundation SA on Tuesday.
This as the 2020 tobacco excise tax increase announced in February was R0.74 per pack of 20, lower than 2019 (R1.14) and 2018 (R1.22), according to the organisations.
“These small tax increases, below inflation, actually end up making cigarettes more affordable over time. They are simply not enough to make people think twice about smoking and do not address the high cost burden of tobacco.
“In the latest tax year, SA collected only R12.5bn in tobacco tax, while tobacco harm costs the state more than R42bn in health-care costs and lost productivity as estimated by a 2020 REEP [Research Unit on Economics of Excisable Products] study.
“Tax-paying South Africans are subsidising the cost of tobacco use to the economy. We must redirect this cost to the tobacco industry and smoker,” said Savera Kalideen, executive director of NCAS.
Dr Catherine Egbe, a specialist scientist in the SAMRC's alcohol, tobacco and other drug research unit, echoed similar sentiments.
“It’s time for SA to step up to our FCTC commitments and truly implement what we signed up for — both in terms of passing the Tobacco Bill and increasing tax. Tobacco tax is part of a broader strategy to reduce tobacco consumption and stop new smokers from starting.
“Evidence from multiple countries shows that lower-income households and adolescents are most sensitive to price increases and do change their smoking behaviour over time. Higher prices can also reduce relapse among those who have quit and reduce consumption among continuing users,” said Egbe.
The REEP study revealed that nearly 30% of respondents who smoked indicated that they had tried to quit during the lockdown, mainly because of higher prices, while many determined smokers who could get cigarettes continued to pay the soaring prices for illicit cigarettes.
“While it’s clear that better support must be given to those who want to quit, lockdown has shown that some smokers will pay higher prices for tobacco products, though this was in the context of it being a temporary situation,” said public health and development consultant Zanele Mthembu.
“The #protectournext organisations argue there is certainly room to increase the tax by 100% or more,” she said.
Trade union federation Cosatu has endorsed the call by the health organisations — but the call was heavily criticised by others.
Among the critics is Tax Justice SA (TJSA), which labelled the move as a betrayal of workers.
“Cosatu is meant to represent workers, protect jobs and help the needy, but this move threatens the very opposite. A significant sin tax increase will drive more hard-up consumers to the illegal market, where no taxes are paid.
“Honest workers in the legal, taxpaying sector — from farmers and manufacturers to suppliers and retailers — will lose their jobs, while criminals get even richer,” said TJSA's founder, Yusuf Abramjee.
The Fair-Trade Independent Tobacco Association (Fita) has also weighed in on the matter and condemned Cosatu's position. The association argues that a substantial increase would encourage the illicit economy as seen during lockdown.
“It is quite mind-boggling that there are sections of society pushing government to increase excise on cigarettes. Such a move would be nothing short of disastrous for both the fiscus and the legitimate tobacco industry and the thousands of people employed along its value chain.
“It is well documented that the smuggling of cigarettes from our neighbouring countries through our porous borders into SA is already out of control and continues unabated,” Fita said in a statement.
The group has called on Mboweni to ignore the calls.
“As evidenced by what was witnessed during the lockdown period, increasing excise tax on cigarettes substantially will only serve to encourage those who ply their trade in the illicit economy, in which criminal syndicates have over the years significantly improved their networks and resources to a point where law-enforcement agencies are unable to tackle them.
“We therefore cannot even begin to have a discussion such as the one pushed by Cosatu and the like without inter alia strengthening capacity within law enforcement to counter the rampant smuggling of cigarettes into the country. We strongly encourage minister Tito Mboweni to ignore such calls,” Fita said.