Proposals from several interest groups hope to convince Minister Tito Mboweni that tobacco taxes should be increased during his “mini-budget” speech later this month. Mboweni is seeking a one-week postponement to his address, which is now likely to be delivered on Wednesday 28 October – a date that smokers should mark in their diaries.
Professor Corné van Walbeek said during a discussion on sin taxes and illicit trade at the virtual tax indaba held on Wednesday that smokers are ‘better-placed’ to absorb rising costs in their preferred products. Cigarettes were infamously banned for long periods of lockdown, forcing tobacco consumers to pay more for inferior, smuggled products.
Van Walbeek is also backed up by the National Council Against Smoking. They believe the Mid-Term Budget is the perfect opportunity for the government to raise funds via tobacco taxes, citing the benefits that a potential increase could bring:
“There is plenty of room for tobacco tax increases – significant tax increases reduce tobacco prevalence, tobacco-related diseases, and is a win for the fiscus. Evidence from countries of all income levels shows that price increases on cigarettes are highly effective in reducing demand. They also reduce relapse among those who have quit.”National Council Against Smoking
However, there is some fierce opposition to these proposals. The Fair-Trade Independent Tobacco Association (FITA) has condemned the idea, with Chairperson Sinenhlanhla Mnguni voicing his frustrations earlier today. Mnguni has reasoned that an increase in tobacco taxes will ‘worsen cigarette smuggling in SA’, creating another boom for the illicit market.
“This is going to exacerbate the already rampant smuggling of cigarettes into South Africa from our neighbouring countries through our porous borders. That is certainly not going to benefit the fiscus. It is more likely to have the opposite effect.”
“If anything, the recent tobacco ban proved that increasing the price of cigarettes isn’t going to reduce tobacco prevalence. What a tobacco tax increase is going to do is drive up the demand for cheaper cigarettes.”Sinenhlanhla Mnguni
If anything, the recent tobacco ban proved that increasing the price of cigarettes isn’t going to reduce tobacco prevalence. What a tobacco tax increase is going to do is drive up the demand for cheaper cigarettes. https://t.co/GcrIpnhbqG— Sinenhlanhla Mnguni (@SinenMnguni) October 14, 2020