Huge benefits to hiking tobacco taxes

If cigarettes were more expensive, young people would find other things to spend their money on, says Dr Yussuf Saloojee.

Johannesburg - On World No Tobacco Day on Saturday, the World Health Organisation (WHO) called on governments to raise tobacco taxes to reduce its use and save lives.

If cigarettes were more expensive, young people would find other things to spend their money on, says the writer. File picture: Ross Jansen. Credit: INDEPENDENT NEWSPAPERS

Higher taxes are effective in encouraging the young not to start, or to quit. When the products are cheap, youngsters can afford to buy them, but when they are expensive they can find better ways to spend their money.

The World Bank advises that increasing excise taxes on tobacco products is the most cost-effective control measure available to governments. Higher taxes increase government revenues and reduce consumption.

Despite this, tobacco tax rates are comparatively low in South Africa. The WHO recommends that taxes should equal 70 percent of the retail price of cigarettes and the World Bank that it should be between 66 and 80 percent.

The tobacco tax rate in this country is below these recommendations – at 52 percent.

There is room to increase tobacco excise tax rates and this will result in higher tax revenues for the government and lower smoking rates.

Opposition to tobacco tax increases is based on the fear that tax increases will fuel smuggling. The link between the illicit trade in tobacco and excise tax rates is at best weak. Countries with high tax rates often have lower levels of smuggling than countries with low tax levels.

In the past decade, smuggling has increased in South Africa despite the Treasury’s conservative tobacco excise tax policy. By contrast, in the UK – where the tax level is between 77 to 88 percent of the retail price – smuggling has decreased because of strong enforcement policies. Smoking among children has also declined.

World No Tobacco Day is an appropriate occasion for the Health and Finance ministries to review tobacco excise tax policy and bring it into line with the WHO’s recommendations.

Some facts:

- Between 1993 and 2009 in South Africa, real (inflation adjusted) excise taxes increased by 378 percent, government tobacco excise revenue by 220 percent, tobacco industry revenue by 69 percent and the number of smokers fell by 33 percent.

- The WHO estimates that the global tobacco epidemic kills nearly six million people each year, of which more than 600 000 are non-smokers dying from breathing second-hand smoke. Unless urgent action is taken, the epidemic will kill more than eight million people every year by 2030.

- The Medical Research Council of South Africa estimates that cigarette smoking killed 45 000 South Africans in 2000.