Vaping industry calls on Treasury to stop e-cigarettes tax

The vaping industry has come out with guns smoking against the National Treasury’s plan to tax e-cigarettes.

Rather they urged the government to take its vaping regulation proposal to Parliament, not through the backdoor to enable all roleplayers to make a contribution on how it should be regulated.

The industry couldn’t wait for the public hearings and the opportunity to make representations before parliament.

Vapour Products Association of South Africa (VPASA) said the government proposal ignored an important fact that e-cigarettes, also known as Taxation of Electronic Nicotine and Non-Nicotine Delivery Systems” (ENNDS), mainly contributed to the smoking reduction rate and smoking quitting in the country.

The VPASA CEO Asanda Gcoyi said the introduction of the vaping tax was unnecessary at this stage. 

“Our biggest problem is that government does not appreciate that ENNDS have been proven to be effective smoking cessation aids and represent an opportunity to reduce smoking rates in South Africa. Additionally, the tax conversation should not overtake the finalisation of a legislative framework for ENDS/ENNDS,” Gcoyi said.

She said Treasury proposed the tax measures based on proposals from the Department of Health, which had not yet finalised the legal framework for ENNDS.

Gcoyi said the proposed vaping tax would represent a major blow to the South African vaping industry, vapers and those seeking to quit smoking or seek less harmful alternatives to smoking.

A high tax would lead to price increases of products and discourage the essential switch from smoking to less harmful alternatives.

Also, a high tax would make e-cigarettes unaffordable to the poor communities who already shared in the bulk those directly affected by smoking harms.

On 15 December 2021, the National Treasury published a discussion paper outlining its proposal for taxation. The interested parties have until Tuesday to comment on the proposal.

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The paper was a sequel to former Finance Minister Tito Mboweni’s budget speech announcement in February last year that National Treasury planned to introduce excise duty on e-cigarettes.

With massive budgetary constraints due to the Covid-19 impact, Mboweni’s successor Enoch Godongwana was expected to reflect on the way forward on the issue in the next budget speech.

The anti-smoking lobby last year welcomed the decision to tax e-cigarettes.

The National Council Against Smoking said taxation would reduce youth use of e-cigarettes and prevent them from becoming addicted to nicotine and later switching to cigarettes and would further reduce disease associated with smoking and save lives.

But the vaping industry had a different view as opposed the taxation. Their understanding was completely the opposite of what NCAS stated.

Gcoyi was concerned that the vaping industry – particularly the small and medium enterprises in the industry – would be severely affected by the vaping tax.

She said some of them will be forced out of business, taking with them valuable jobs which are currently hard to come by in the depressed South African economy.

Research by NKC African Economics showed more than 350,000 South Africans used vapour products and contributed to R280 million in paid taxes in 2019 while it generated 3,800 jobs during the same period.

The vapour products sales amounted to R1.25 billion. Indirectly the vaping industry contributed R1.09 billion to the GDP.

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The total economic impact on a wider scale in terms of gross value added, the industry supported over 9,500 jobs and contributed more than R2.49 billion to the GDP in 2019.

This amounted to R710 million taxes paid.

The industry feared taxation would negatively impact its contribution to the country’s economic growth as all these would feel the taxation pinch.

Vpasa said there were too many smokers in the country to justify measures that would make vaping unaffordable to millions of poor smokers.

“Economically, vaping products are substitutes for tobacco smoking. Should they become unaffordable, addicted smokers are likely to be discouraged from trying these products, thus reducing the potential to switch and reduce accrued harm,” Gcoyi said.

She challenges Cabinet to table the Control of Tobacco Products and Electronic Nicotine Delivery Systems Bill to Parliament to afford South Africans and the scientific community an opportunity to make representations about the regulations.

Based on parliament’s decisions, it will then be prudent for the Treasury, industry, consumers, and the public health community to determine the right level of taxation that should be levied.

“Until then, the introduction of a tax represents regulation of the industry via the backdoor, which usurps the role of Parliament in regulation,” Gcoyi said.