Godongwana urged to resist temptation to impose unsustainable ‘sin tax’ hikes

As Finance Minister Enoch Godongwana prepares to deliver his first budget speech under the government of national unity (GNU), Tax Justice SA (TJSA) said Godongwana must resist the temptation to impose unsustainable ‘sin tax’ increases.

Godongwana will deliver this year’s Budget Speech on Wednesday at the Nieuwmeester Dome in Cape Town. The speech will outline government’s financial, economic, and social priorities and detail expenditure plans for 2025.

Revenue proposals

The minister is also expected to present revenue collection proposals, including increasing sin taxes on cigarettes and alcohol to support government programmes.

During the weekend, the Sunday Times reported that National Treasury was considering hiking several taxes and possibly introducing new ones to cover a massive budget shortfall.

According to the publication, all taxes could be impacted — including value-added tax (VAT), personal income, corporate taxes, and even the possible introduction of a wealth tax.

Other revenue generation options include hiking the fuel levy, increasing sin tax, and possibly ending medical aid tax credits.

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Illicit trade

TJSA founder Yusuf Abramjee said Godongwana should prioritise the urgent need to combat the rampant illicit trade, which “robs the country of more than R100 billion in tax revenue every year”.  

 “Raising taxes on legal alcohol and tobacco products will not generate the revenue the government needs — it will only drive more consumers into the arms of criminals selling illicit goods,” said Abramjee. “The fiscus is haemorrhaging billions because law enforcement agencies are failing to crack down on the massive black market in these sectors. This must end.”

Sin tax

 Abramjee warned that illicit trade in alcohol and tobacco has reached crisis levels, fuelled by excessive taxation that has created a price gap that criminals eagerly exploit.

“As a result, legal businesses are suffering while crime syndicates thrive, robbing South Africa of the funds needed to provide essential public services such as healthcare, education and infrastructure.

 “Instead of imposing more punitive taxes on law-abiding citizens, Minister Godongwana must ensure that enforcement and prosecution authorities are properly resourced to take down the syndicates responsible for illicit trade,” Abramjee said.

Sars on illicit trade, money laundering and tax evasion

Abramjee said Godongwana must also “explain” why the South African Revenue Service (Sars) has not been ordered to withdraw the licences of cigarette manufacturers implicated in illicit trade, money laundering and tax evasion.

 “By effectively combating these criminal networks, the government could recover billions in lost revenue, relieve pressure on taxpayers and ensure a more sustainable and fair taxation system.

 “Targeting law-abiding consumers and businesses with even higher taxes will backfire. The solution is to clamp down on the illicit economy, reclaim the stolen billions and use them to build a better South Africa for all,” Abramjee said.

Finding money

National Treasury has to find money for unplanned expenditure items not forecast in the 2024/25 budget.

There is also pressure on Godongwana to find billions of rands to bolster HIV/Aids programmes, which are under threat after the US government declared a 90-day moratorium on all foreign aid.

This affects programmes under the US president’s emergency relief plan for Aids relief (Pepfar), which channels about R7.5 billion annually to local non-governmental organisations working in the sector. A subsequent waiver signed by Secretary of State Marco Rubio reinstated some of the aid.

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