Small hike in tobacco tax not enough
‘This modest increase will delight cigarette manufacturers but harm the public and the fiscus,’ reads an official statement by the National Council Against Smoking (NCAS).
It is government policy to passively maintain the cigarette excise tax level at 39.7% of the retail price. Since last year manufacturers have hiked the recommended retail price of a packet of 20 Peter Stuyvesant by R1.50 ‘ from R24.50 in February 2011 to R26 currently. Accordingly, the excise duty on cigarettes will have to rise by 58c in the budget to catch up with the industry’s higher prices.
The NCAS warned that the modest tax rises will reduce the incentive for people to quit smoking, and not deter children from starting.
‘The Treasury’s current tax model is hopelessly outdated ‘ the percentage tax incidence on tobacco products has not changed since 2004,’ said the NCAS statement. ‘The model also gives the tobacco industry complete power to determine the amount by which excise duties will alter in the budget ‘ if the industry had not increased prices in 2011, the amount to be paid in excise taxes would not have changed.
Research shows that increasing tobacco tax rates not only increases government revenues but also reduces the prevalence of tobacco use. Smokers are more likely to quit when cigarettes are expensive.
‘South Africa’s tobacco tax policy is thus in urgent need of review, especially since cigarettes kill over 44000 of our citizens every year,’ the NCAS said.
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