Picture: Ian Landsberg/African News Agency (ANA).
Picture: Ian Landsberg/African News Agency (ANA).

Alliance calls for sugar tax increase to pay for vaccines

By Siphelele Dludla Time of article published Mar 5, 2021

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An alliance of non-governmental organisations has called on the government to increase the health promotion levy to 20 percent to help South Africa pay for Covid-19 vaccines.

The Healthy Living Alliance (Heala) said yesterday that hiking the levy from the current 11 percent could raise billions of rand for Covid-19 in the short-term, and also reduce non-communicable diseases over time.

Head of Heala Lawrence Mbalati said increasing the levy would further the tax's positive effects by providing increased revenue and healthcare cost savings.

Introduced in April 2018, the levy is a sugar-sweetened beverage tax of R2.21 for each gram of sugar in a beverage that contains over 4g of sugar per 100ml.

A modelling study from 2016 found that a 20 percent tax could offer significant healthcare cost savings for the government by averting an estimated 72 000 premature deaths and more than R5 billion in healthcare costs over 20 years.

“The health promotion levy of 11 percent has already raised R5.8bn for the government,” Mbalati said.

“Increasing the health promotion levy to 20 percent could help South Africa pay for Covid-19 vaccines and thousands of additional nurses, doctors and community healthcare workers.”

Finance Minister Tito Mboweni will next week outline how the fiscus will finance South Africa's Covid-19 vaccine programme.

The government estimates that the Covid-19 vaccination programme could cost at least R20bn as more than 40 million citizens need to be vaccinated to achieve herd community.

Tax analysts have, however, dismissed possibilities of any significant tax hikes amid expected budget overrun.

South Africa has asked the Serum Institute of India to take back the 1 million Covid-19 vaccine doses that cost R78m to procure earlier this month.

The country has since pivoted to using the Johnson & Johnson vaccine, where 80 000 doses were said to be arriving yesterday.

Former head of National Treasury's budget office, Michael Sachs, said the health promotion levy was a narrowly focused tax that would struggle to achieve the objectives set out by Heala.

The adjunct professor at Wits University said the value-added tax (VAT) and fuel levy were the best examples

of broad-based taxes that were also dependable sources of revenue.

“I think from a public finance point of view the first lesson you learn is that taxes on consumption should be broad-based as far as possible, and that is why there is preference for VAT among Treasury officials,” Sachs said.

“But if your purpose is raising revenue with the least cost, you should focus on products that are highly inelastic, things that will impose the tax and people's behaviour will not change in response to the tax.”

Meanwhile, the South African Breweries (SAB) appealed to Mboweni not to increase excise taxes in the coming Budget speech following losses the alcohol industry suffered as a result of multiple lockdowns.

SAB director of regulatory and public policy Hellen Ndlovu said the beer industry contributed R15.5bn in excise to state coffers in 2019 before the pandemic.

“In the short term, we ask for no excise increases,” Ndlovu said.

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