The Tobacco Institute of South Africa on Wednesday described as “regrettable” the increase in excise duties on tobacco, cautioning it could negatively affect the country’s tobacco farmers.
Commenting on Wednesday’s Budget, Tobacco Institute CEO Francois van der Merwe said that an increase of 64c in excise on a pack of 20 cigarettes translates into a 16,5% increase in cigarette excise tax, which is way above inflation and “cause for concern”.
The increase in excise for pipe tobacco is 25c per 25g (17,3%) and for cigarette tobacco (roll-your-own) 73c per 50g (11,7%).
“If government’s aim with the increase in tobacco excise duties is to reduce the incidence of smoking, while maintaining stable levels of tobacco tax revenue, these increases should be balanced to support this dual aim,” Van der Merwe said.
“Over a period of 10 years, excise duties on cigarettes have increased by nearly 540%. Whilst the constant increase in tobacco excise duties has resulted in a drop in volumes of legal products, it has also contributed to the alarming growth in the illegal trade in tobacco products.
“With growing pressure on disposable income, many consumers are moving away from the legal product to illegal, untaxed products. The illegal trade in tobacco products results in a lose-lose situation for government and the industry,” he said.
“South Africa’s tobacco farmers could also be negatively affected by excise increases which exceed inflation. They sell about 40% of their tobacco to the local market. As the legal market becomes smaller and illegal operators prosper, demand for locally-grown tobacco may diminish. This could lead to significant job losses in the agricultural sector,” he said. — I-Net Bridge