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Two steps forward on e-cigarette tax, but a step back on tobacco tax

The National Council of Smoking (NCAS) welcomes the tax on e-cigarettes and lauds the Minister of Finance for stepping in to close the regulatory gap that has existed for over 10 years.

Children who start using e-cigarettes are at risk of addiction and are more likely to progress to smoking tobacco cigarettes. A tax will prevents this, it raises the price‚ and deters children from starting to use e-cigarettes. It also protects public health, as e-cigarettes are linked to serious health risks, including heart and lung diseases, and a high risk of strokes.

Unfortunately, the tax increase of R1.03 per pack of 20 cigarettes cannot be justified in either health or fiscal terms. The yearly tax increase, should progressively make tobacco less affordable, instead the 2022 increase of 5.5% is a regression from the 2021 8% increase. The National Treasury accepts that “higher prices should lead to lower consumption of products with positive spinoffs.” It is difficult to rationalise the marginal tax increase, it will be absorbed by manufacturers, will not lead to price increases, and will not discourage young people from starting to smoke or get more smokers to quit or cut down.

Minister Godongwana did not seize the opportunity to smooth the fiscal imbalance, that tobacco use contributes to. For every R1 government receives in tobacco taxes, the economy loses R3.43 in treating tobacco-related illnesses, lost productivity and premature deaths – R42 billion is lost due to the tobacco burden each year. Less than R8 billion was collected from tobacco taxes in 2020/21, this leaves a deficit of over R34 billion.

The Minister of Finance had every reason introduce a hefty tax for tobacco, this would have solidified the National Treasury’s “commitment to the reconstruction and recovery of our economy, saving lives and restoring livelihoods, as well as securing the long-term prosperity of our nation.”

For further information please contact:

Dr Sharon Nyatsanza

Deputy Director - National Council Against Smoking

Tel: 011 7251514

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