Excise tax on cigarettes predicted to increase by 60c/pack in budget
Increase does not meet public health needs as criminals are being allowed to decide tax policy.
In next week’s budget Finance Minister, Mr. Pravin Gordhan, is expected to announce an increase in cigarette excise duty of about 60 cents per pack of 20. Smokers will also pay 18c/pack more in VAT. So the total tax will increase by about 78 c/pack. Further, based on past behaviour, the cigarette manufacturers will (gradually) add their own increase of about 72 c/pack. Smokers can therefore expect to pay about R1.50 more per pack within a few months of the budget.
The National Council Against Smoking regards the tax increases as inappropriate in meeting the government’s goal of reducing smoking by children and accuses the Treasury of allowing criminals to influence tax policy.
A tax hike of 78c/pack hike may appear large but, in the past year, the recommended retail price of cigarettes has increased in line with inflation. So, in real terms, cigarettes have become more affordable. This is of great concern because studies consistently show that above-inflation increases in cigarette prices are needed to reduce smoking among teenagers. Children are less likely to start smoking if they cannot afford to buy cigarettes.
Moreover, in setting its tobacco taxes the Treasury’s official policy is to take into consideration both the need to reduce cigarette smoking for health reasons and the need to increase government revenues. The Treasury has in practice abandoned both these goals.
The current thinking within the Treasury seems to be based on the mistaken belief that keeping the cigarette excise tax rate low will discourage smuggling. This is a misguided policy, that hands power over government taxation policies to criminals. It responds more to the threat from smugglers than to the needs of public health.
To make matters worse the policy may not be working. because, according to cigarette company claims, tobacco smuggling has increased in South Africa in recent years.
The real solution to the smuggling problem is to strengthen border controls, to actively investigate criminal gangs and the cigarette manufacturers who supply them, and to impose strong penalties on those caught smuggling. Sacrificing the future health of children to appease criminals is no solution.
Since 2004, the Treasury has set the tax rate on smoked tobacco products at 52% of the retail price, which is well below the 75% recommended by the World Health Organization.
South Africa’s tobacco tax policy is thus in urgent need of review, especially since cigarettes kill over 44000 of our citizens every year.
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For more information contact :-
Dr Yussuf Saloojee : Executive Director NCAS – 011 725 1514 or 076 633 5322