Cigarette companies make billions while our lines get longer. Increase the tobacco tax

Each year South Africa spends more than R59 billion [1] to address tobacco related illnesses like lung cancer, emphysema, asthma and bronchitis. At the same time the country only collects between R11 billion and R13 billion from tobacco taxes. Last year South Africa’s largest tobacco company British American Tobacco alone took a profit of R2.3billion, after tax [2]. This means the South African taxpayer is paying for the healthcare bill of tobacco-related harm while the tobacco industry collects the profits. The only way to change this scenario is to substantially increase excise taxes on tobacco.

In 2018, the finance minister increased the tobacco excise tax by just R1.22 for a pack of 20 cigarettes [3]– this translated to an increase of a mere R2.50 for someone who smokes two packets a week. Although this increase was in line with the CPI, it did little to reduce the affordability of cigarettes. And this small increase will not encourage a drop in consumption.
The tobacco industry has constantly exaggerated the size of the illicit trade to put false pressure on tobacco tax policy. But 2014 research by UCT’s Professor Corne van Walbeek shows that the tobacco industry has been adjusting its estimates of the illicit trade to create the illusion that it has been rapidly growing [4]. Although he agrees that illicit trade exists, he says that if previous estimates by the tobacco industry were incorrect, the credibility of current estimates should be questioned.

Illicit trade in South Africa can only be tackled through enforcement. This primarily comes from the criminal justice sector. But the Hawks and the National Prosecuting Authority have been in disarray and the South African Revenue Service has deliberately been undermined. As a result, enforcement has not taken place, particularly in the last six years.
The long-term solution for South Africa is to implement the World Health Organisation’s Illicit Trade Protocol [5]. This calls for the use of an independent and effective system that regulates cigarette production, import, export and sale. South Africa signed the Protocol in 2013 [6] but has still not ratified or taken steps to implement it.

What can be done?

Prevention costs less than treatment. Prevention means reducing the number of smoker- and one of the most effective ways to do this is to increase the price of tobacco. This is how we can take back the tax that is spent on tobacco-related health harm.
We call on the National Treasury to increase the excise tobacco tax to 70% of the current price of cigarettes and other tobacco products. This has been recommended by both the World Health Organisation and the World Bank [7].

It would make cigarettes more expensive and reduce consumption. And it will send a clear message to the tobacco industry that their attempts to undermine evidence-based healthy public policy are not successful.

Tobacco taxes are a win-win for public health and public finances.

References

[1] The Tobacco Atlas - South Africa

[2] BAT revenue rises but profit and market share fall. Robert Laing for Bizcommunity 28 JUL 2017 |

[3] 2018 Budget Speech by Malusi GigabaMinister of Finance 21 February 2018

[4] Are the tobacco industry's claims about the size of the illicit cigarette market credible? The case of South Africa. 2014 Corné van Walbeek, Lerato Shai

[5] WHO Protocol to Eliminate Illicit Trade in Tobacco Products

[6] SA signs tobacco smuggling treaty. IOL, 11 JANUARY 2013

[7] TAXING TO PROMOTE PUBLIC GOODS: TOBACCO TAXES. World Bank