Simnikiwe Hlatshaneni
Premium Journalist
2 minute read
27 Oct 2020
10:27 am

Cosatu supports 100% tax hike on tobacco

Simnikiwe Hlatshaneni

While experts have linked increased taxes to the thriving illicit cigarette trade, the federation wants the government to increase its capacity to fight tobacco tax evasion.

Picture: Shutterstock

Trade union federation Cosatu supports the anti-smoking lobby’s proposal of a 100% tax increase on tobacco products.

And it wants the government to use the tax revenue to fight the illicit drug trade and improve healthcare.

Various organisations in the health sector this week launched a campaign to pressure finance Minister Tito Mboweni to increase taxes in tobacco products ahead of his mid-term budget announcement.

“Cosatu supports measures that seek to reduce the excessive consumption of tobacco, especially amongst young people and pregnant mothers,” said Cosatu parliamentary organiser Matthew Parks.

Unions have supported sin tax increases over the years as part of efforts to reduce tobacco consumption and assist the government with subsequent healthcare costs.

While experts have linked increased tobacco product taxes to the thriving illicit cigarette trade, the federation wants the government to increase its capacity to fight this revenue-stealing problem.

Parks said the organisation was concerned with the explosion in the illicit trade in tobacco, which grew massively during the lockdown when tobacco sales were temporarily banned.

Tax Justice South Africa founder Yusuf Abramjee argues that a tax increase of that amount would weaken the government’s fight against the growing tobacco black market.

“A significant increase in tobacco excise taxes would fuel the illicit trade and ending up losing tax revenue desperately needed by the South African people. The lockdown sales ban proved there are plenty of criminals willing and able to supply cigarettes outside the legal, taxpaying system,” said Abramjee.

Independent research by the University of Cape Town showed that more than 90% of smokers were able to buy tobacco products during the prohibition, when more than R5 billion was lost in tobacco excise taxes alone, he said.

These illegal networks became even stronger than in the years before lockdown, which even then accounted for one in every three cigarettes sold in South Africa.

An increase in excise taxes now would make legal, taxpaying cigarettes more expensive, Abramjee said. This would make illicit cigarettes on which no taxes are paid even more attractive for hard-up smokers.

To raise money on behalf of honest South Africans, he suggests, the government should be trying to strengthen the taxpaying sector by allowing smokers to return to the legal market.

“Those calling for an excise increase are merely playing into the hands of criminals and threatening to rob the fiscus of money it urgently needs.”

According to Abramjee, at least R8 billion a year could be raised to help the vulnerable by enforcing existing tax laws and cracking down on criminals making their fortunes in the illicit trade.

For more news your way, download The Citizen’s app for iOS and Android.