Health-e (Cape Town)

25 February 2013

South Africa: R1.50 Hike in Cigarette Prices

Although smokers are expected to pay around R1.50 more per pack of 20 cigarettes, experts believe this increase is insufficient to deter young people from taking up this unhealthy habit.

Finance Minister Pravin Gordhan is expected to announce an increase in cigarette excise duty of about 60 cents per pack of 20 in this week’s budget. Smokers will also pay 18c/pack more in VAT, and therefore the total tax will increase by about 78c/pack.

Further, based on past behaviour, the cigarette manufacturers will add their own increase of about 72c/pack, and smokers can therefore expect to pay about R1.50 more per pack within a few months of the budget.

The National Council Against Smoking (NCAS) regards the tax increases as inappropriate in meeting the government's goal of reducing smoking by children and accuses the Treasury of allowing criminals to influence tax policy.

"A tax hike of 78c/pack hike may appear large but, in the past year, the recommended retail price of cigarettes has increased in line with inflation. So, in real terms, cigarettes have become more affordable," NCAS said in a statement. "This is of great concern because studies consistently show that above-inflation increases in cigarette prices are needed to reduce smoking among teenagers. Children are less likely to start smoking if they cannot afford to buy cigarettes.

"Moreover, in setting its tobacco taxes the Treasury's official policy is to take into consideration both the need to reduce cigarette smoking for health reasons and the need to increase government revenues. The Treasury has in practice abandoned both these goals," NCAS alleged.

Yusuf Salloojee, executive director or NCAS believes that current thinking within the Treasury seems to be based on the mistaken belief that keeping the cigarette excise tax rate low will discourage smuggling. "This is a misguided policy that hands power over government taxation policies to criminals. It responds more to the threat from smugglers than to the needs of public health," he said.

If that is the case the policy may not be working, because cigarette companies claim that tobacco smuggling has increased in South Africa in recent years.

Salloojee believes the real solution to the smuggling problem is to strengthen border controls, to actively investigate criminal gangs and the cigarette manufacturers who supply them, and to impose strong penalties on those caught smuggling.

Since 2004, the Treasury has set the tax rate on smoked tobacco products at 52% of the retail price, which is well below the 75% recommended by the World Health Organisation.

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