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Tobacco taxed less than bread: Health24: Smoking: News,72911.asp
The Budget has once again got it wrong when it comes to taxing tobacco, says
the National Council Against Smoking (NCAS), quipping that the tobacco tax
is a “stale policy”. , quipping t, ,…, quipping

The NCAS pointed out in a statement issued today that, considering that the
price of a loaf of bread rose by R1 in 2011, an increase in cigarette excise
duties of 58 cents per pack is “puny”, and that allowing the price of
essential goods like food to increase faster than that of deadly products
like cigarettes, indicates fatal flaws in policy making.

Finance ministry uses ‘dated formula’

According to the NCAS: “The finance ministry mechanically calculates the
level of excise duty on cigarettes using a dated formula that no longer
serves the public good.”

“In 1997, it set the total taxes on cigarettes at 50% of the retail price.
This increased marginally to 52% in 2004. At each Budget, treasury officials
simply look at the recommended retail price of cigarettes and then calculate
by how much the tax has to change to keep the rate at 52%. A hackneyed
method, which fails to optimally tax tobacco so as to increase government
revenues, reduce cigarette smoking and cut future health care costs.

SA tax well below WHO recommendation

The NCAS also drew attention to the fact that tax incidence in South Africa,
at 52% (VAT plus excise taxes), is also well below the World Health
Organization’s (WHO) recommendation that excise taxes should be at least 70%
of the retail price.

The World Bank has concluded that making cigarettes less affordable is the
single best way of deterring young people from starting to smoke and to get
smokers to quit or cut down. Higher taxes also mean higher government

The NCAS recommends that the aim should be to progressively reduce the
affordability of tobacco products by changing the tax in line with increases
in income and inflation.

“We have a crazy situation where the finance ministry is apparently more
concerned about the illicit trade in tobacco than about raising revenue or
reducing tobacco consumption”, says Dr Yussuf Saloojee of the NCAS.

“The government must increase the tax on cigarettes and if the cigarette
companies seriously think that this will increase the illegal trade in
cigarettes then they can always reduce their profit margins to keep prices

– Adapted by Olivia Rose-Innes from an NCAS press release, Health24,
February 2012

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