Turning sin tax into savings
If giving up alcohol and cigarettes were part of your new year’s resolutions, the latest sin tax increases provide an even better reason to start.
In his 2018 Budget Speech, Finance Minister Malusi Gigaba announced the annual increase in excise duties, otherwise known as sin taxes.
Wine will cost you 30c more per litre, with duties increasing from R3,61 to R3,91 per litre. Spirits will cost R190,08 per litre, up from R175,19.
This means you will spend about R61,30 in excise duties per 750ml bottle.
Smokers will be paying R15,52 in tax per box of 20 cigarettes, an 8,5 per cent increase from the current rate of R14,30.
Have you ever considered what you could possibly be doing with the money you would save if you were to stop smoking and drinking, and how this choice could impact your life in a financially empowering way?
According to Kwaku Koranteng, an economist at Absa, giving up drinking and smoking could have a profound effect on your pocket.
“Say you spend R500 per month on wine and cigarettes, and you decide to quit and rather save that money – you would realise R30 000 in savings over five years without investment growth,” said Koranteng. “If you took those savings and put them in a fixed deposit savings account with an investment growth of 9 per cent per annum, you would realise R37 712,07 at the end of the five years.”
This is compounded by the fact that sin taxes have risen above the inflation rate, and have done so consistently in recent years, Koranteng added.
“At a time when the entire country is feeling economically pressured, these are significant savings that cannot be ignored. Of course there are the added health benefits of quitting drinking and smoking and the fact that you will be able to enjoy the savings you have made in new and interesting ways.”
If giving up alcohol and cigarettes were part of your new year’s resolutions, it’s never too late to start. Coupled with a strategy to save more this year, you could end up with quite a bit of money for a rainy day or to spend on a family holiday.
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