The Fair Trade Independent Tobacco Association (Fita) has condemned trade union Cosatu’s endorsement of the proposed 100% tax hike on tobacco products.
Fita chairperson Sinenhlanhla Mnguni said such a move “would be nothing short of disastrous for both the discus and the legitimate tobacco industry, and the thousands of people employed along its value chain”.
Organisations in the health sector this week launched a campaign to pressure Finance Minister Tito Mboweni to increase tobacco product taxes ahead of his medium-term budget statement.
Cosatu, in addition to endorsing the campaign, suggested the government use the tax revenue to fight the illicit drug trade and improve healthcare.
Fita warned that the smuggling of illegal cigarettes from neighbouring countries is “already out of control and continues unabated”.
Mnguni noted a significant shift in the South African cigarette market, from brand conscious to price conscious consumers, and implementing policies such as a 100% tax hike on tobacco products means more products from non-compliant sources what do not pay tax are likely to flood the market.
This, Mnguni said, was evident during the hard Covid-19 lockdown when the illicit cigarette trade was rife due to the unavailability of any tobacco products.
“Increasing excise tax on cigarettes substantially will only serve to encourage those who ply their trade in the illicit econom. Criminal syndicates have over the years significantly improved their networks and resources to the point where law enforcement agencies are unable to tackle them.”
The discussions surrounding tax increase proposals such as endorsed by Cosatu cannot even be contemplated without strengthening law enforcement to tackle cigarette smuggling.
“We strongly encourage Minister Tito Mboweni to ignore such calls.”
(Compiled by Nica Richards)