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The illegal trade in cigarettes should not prevent us from raising tobacco taxes. Read why.
Finance Minister Tito Mboweni has a difficult job. He will be recalled to the nation tonight when the minister delivers his speech on the annual budget. Saving the country's troubled public companies, such as the national airline and Eskom, may be at the top of the list.
But in a time of tight budgets and rising sickness rates, Mboweni's speech should also focus on something else: tobacco taxes.
Under apartheid, the government had an intimate relationship with the tobacco industry and tobacco control policies were almost non-existent, according to the authors of a 2003 World Bank book.
But since the advent of democracy, the government has increased excise taxes every year on tobacco products. The increase in excise taxes makes cigarette use less affordable and, as a result, smokers reduce their consumption or completely quit smoking, according to the World Health Organization (WHO). This makes it one of the most effective ways to reduce smoking, according to the world organization. Excise taxes also help offset the costs borne by the public health system when it is alone in paying the bill for deaths and diseases related to smoking.
But the reality is that increases in the tobacco tax – especially over the past six years – have been marginal.
According to figures presented to Parliament, the National Treasury has increased excise taxes on cigarettes by between 58 and 82 cents a year between 2012 and 2017. The increase from last year RY 1.14, R14.30 to R15.52, was the largest increase in seven years.
But was this tax hike enough to entice smokers to give up the habit? To learn more and help inform the public debate, the National Council Against Tobacco asked the project "Economics of Tobacco Control" of the University of Cape Town to model the impact of different levels of education. increase.
The unit researchers collected historical information on cigarette tax rates and consumption in a series of equations and mathematical algorithms to create a model for simulating, on paper, the reaction of consumers face the increase in the price of their daily dose of tobacco.
The model was based on some key badumptions, including that tobacco companies would not change their prices to offset higher taxes. The badysis also badumed that about half of any reduction following tax increases would be due to the fact that smokers were not only reducing the amount of cigarettes they smoked, but that they completely quit, as suggested in the 2011 International Center for Research on Cancer manual.
We found that the increase in the excise tax on treasure cigarettes in 2017 meant that South Africans would have smoked 12.2 million fewer cigarette cartridges than in 2017. One estimates that this increase would bring an additional $ 103.4 million to the state coffers, compared to what it earned from the same tax in 2017.
The tax increase still meant that people who smoked an average of nine cigarettes a day would have spent only about 200,000 rand a year on cigarettes – too little to radically change behaviors, according to the report. Modeling experience.
The badysis has attempted to include cigarettes sold illegally, according to our recent studies, which currently account for about 30% of the total market.
How much does it cost for a fix? Knowing what South Africans are willing to pay for cigarettes is the key to winning the country's war against death and smoking-related diseases. Now the new models bring us closer to the answer.
This year, South Africans have once again opted for social media by offering their "Tips for Tito" before the budget speech.
Here is ours: if Mboweni repeats the decision of his predecessor to raise the tobacco tax by only 3% above inflation, as he did last year , our simulations indicate that it will bring back 180 million rand to the state.
But it will not be enough to encourage a significant number of South Africans to reduce their tobacco consumption. In fact, according to our badysis, this would only reduce cigarette consumption by 8.4 million packets.
Our advice for Tito? Increase excise taxes on cigarettes by at least 8% above inflation per year over the next four years. Assuming that inflation remains at 5% per annum, an increase of 8% above inflation would increase the excise duty to 25.66 rand by 2022.
If the average price of a box of cigarettes is currently 34.29 rand, this increase would mean that smokers would pay on average about 37.81 rand per box after the first increase and that in the fourth year, they would pay on average 51.09 rand. box.
By the end of four years, the country would smoke about 90 million fewer packs of cigarettes than today.
And four years from now, this tax increase would mean an incredible 17.1 billion rubles collected for the national treasury, up from 11.8 billion currently.
But is Tito going to Big Tobacco? The tobacco industry continues to argue that the increase in excise taxes will support illicit trade, prompting more people to look for cheaper alternatives than legal brands.
Smuggling of illicit cigarettes in South Africa and the region is a criminal and illegal trafficking that requires strict enforcement and enforcement by the criminal justice sector. It can not be used to curb effective public health policies that will improve the quality of life of South Africans and reduce the burden on an already overburdened public health system. It is up to the South African Revenue Service and the criminal justice system to enforce the tax and put the scammers behind bars.
Nearly 60% of all deaths in South Africa were attributed to noncommunicable diseases (NCDs) in 2016, including those related to smoking, such as cancer and cardiovascular disease, Statistics South data show.
South Africa has an obligation to respect the nine WHO voluntary goals for noncommunicable diseases worldwide, including mental health, to which it has subscribed. For these goals to be achieved by 2025, for example, the number of deaths due to cancer and chronic respiratory diseases must be reduced by 25% from 2010 levels. For the country to meet its goals and to avoid these deaths, the government will have to implement various tobacco control interventions.
But these deaths do not just concern lives lost. Smoking costs South Africa about 59 billion rand a year in health care costs, but also in lost productivity in terms of illness and death, according to the Tobacco Atlas, annual report of the American Cancer Society.
The Tobacco Control Bill is expected to be submitted to the new Parliament later this year and hopes to address it by introducing, for example, completely non-smoking indoor public spaces, by regulating electronic cigarettes and introducing electronic cigarettes. neutral packaging of cigarette packs.
However, that is not enough. The only way to ensure that taxpayers do not subsidize tobacco – related damages is to substantially increase tobacco excise taxes. This will offset the costs to the public health system and the burden of harm will be borne by the smoker and the tobacco industry.
In addition to these economic benefits, excise tax increases will also reduce the number of smokers, creating a virtuous cycle of reducing public health costs and increasing tax revenues.
Savera Kalideen is the Executive Director of the National Council Against Tobacco. Follow her on Twitter at @ SAQuitline. Kirsten van der Zee is a research fellow at UCT's Economics of Tobacco Control project. Follow the @Tobaccoecon unit or contact them by email to find out more about their latest simulations and tax data.
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