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Cigarette and alcohol taxes go up even though you can’t legally buy them

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One of the ironies of the times in which we live is that taxes on cigarettes and alcohol are to go up – even though there isn’t a hope in hell of government collecting any of this while there is a ban on cigarette and alcohol sales.

Proposed changes to tax laws have just been announced, making good on finance minister Tito Mboweni’s 2020 Budget promise to raise “sin” taxes on cigarettes and alcohol.

In his February Budget speech, Mboweni said a 340ml can of beer or cider would increase by 8c, and a 750ml bottle of wine would increase by 14c.

Excise on a box of 20 cigarettes would go up an extra 74c. Last week, government tabled the proposed changes to tax laws and rates, and invited public comment. Now might be a good time to make your voice heard.

Mboweni may not have known in February that a lockdown was coming and the tax collection projections he was banking on from cigarettes (and alcohol) would go up in smoke.

Then came the lockdown. Despite the ban on cigarette sales, 90% of smokers continuing to get their daily fix from their “dealers”. An estimated 11 million South African smokers have been criminalised, and Tax Justice SA (TJSA) estimates the loss to the fiscus of R5 billion so far. The loss is running at R35 million a day.

“The 132-day-old ban is causing untold misery for millions, robbing the fiscus of R35 million daily and destroying thousands of jobs,” says TJSA founder Yusuf Abramjee, after hearing court evidence led by cigarette manufacturer BAT against the government ban.

“Anyone who had to sit through two days of repetition, rambling and long-winded explanation by Minister Dlamini-Zuma’s lawyers will know how weak her case is,” says Abramjee. “Sadly for the three judges, they have a duty to consider the huge volumes of paperwork with which the Minister has tried to overwhelm them.

“But the President should not wait for their verdict, as patently the ban is so wrong and is doing so much harm. He should do the right thing and lift this failed prohibition immediately.

President Cyril Ramaphosa has promised to crack down on officials who break the law to profit from the pandemic after stories started emerging of politically-connected individuals scoring massive Covid-related supply contracts. Meanwhile, rumours abound of politically-connected suspects raking in profits from illegal cigarette sales.

Whether true or not, the tobacco industry in SA has been gutted, taken over by black market operators. SA Revenue Services (Sars) had spent the last decade trying to clean up the tax-dodging in this sector. It’s been set back at least a decade by the ban. The black market operators will not easily be dislodged, even when the ban is eventually lifted.