NCAS calls on the finance minister to increase excise tax on tobacco to cover the cost of the harm

The National Council Against Smoking hosted a media briefing on tobacco tax and illicit trade today, calling on Finance Minister Tito Mboweni to increase excise tax on tobacco products by 18 percentage points to 70%. Mboweni delivers the Mid-Term Budget Policy Statement next week, on October 24, 2018.

South Africa currently collects about R13 billion a year in taxes from tobacco sales while the tobacco-related harm costs South Africa R59 billion each year. The taxes collected cover just a fraction of the harm while the rest of the burden is carried by the taxpayer. This figure does not even begin to quantify the human cost of ill-health and early death. Increasing excise taxes can address this financial imbalance.

In the 2018 budget statement, former Finance Minister Malusi Gigaba increased the excise tax on tobacco products by between 6% and 10%, resulting in a price increase of only R1.22 per pack of cigarettes. This is simply not enough of an incentive for behaviour change. This increase came two months before Health Minister Aaron Motsoaledi released the Draft Tobacco Control Bill for comment. The Bill will make all indoor public places 100% smoke-free, regulate e-cigarettes and introduce plain packaging with graphic health warnings.

At the breakfast briefing, Savera Kalideen, Executive Director of the National Council Against Smoking, said: “The best way to reduce tobacco consumption is to increase the price to such an extent that it becomes less affordable to smokers. This will make them cut down or stop completely.”

One of the reasons thought to be behind government’s decisions not to increase tobacco tax significantly is that it could introduce a spike in illicit trade.

However, Laura Rossouw from UCT’s Economics of Tobacco Control Project said figures around illicit trade released by the tobacco industry are not transparent or reliable. Kenya was an example of an African country with a good system to track and trace excisable goods. It has been able to count production, control stock and detect counterfeit goods. Excise tax revenue in the country increased by over 14% after the system was implemented.

Ilze Enslin from the Legal Policy Unit at the South African Revenue Service admitted that South Africa’s current system was flawed but said putting a new system in place to tackle illicit trade in South Africa is complicated. She said the revenue service was taking steps to put a legislative provision in place for a system to be implemented.

Efforts by the National Council to lobby for an increase in the tobacco tax comes amid ongoing revelations at the Nugent Commission of impropriety at the South African Revenue Services around tobacco tax enforcement and illicit trade. UCT’s research indicates that while the illicit trade is certainly real, SARS, the NPA and the criminal justice system need to take concrete steps to address the gaps that allow this trade to flourish.

Catherine Egbe from the SA Medical Research Council said the tobacco industry had launched an onslaught on the new Draft Tobacco Control Bill to try and send a message that the Bill would increase the illicit trade. “But this is not the case. They are trying to launder their image as the good guys,” she said.

For more comment:

NCAS Executive Director Savera Kalideen

Tel: 011 7251514 Cell: 0712270939

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