The new sin tax on vaping products came into force on June 1, more than doubling the retail price of many vape e-liquids, regardless of the nicotine content. The tax is being levied at R348 per 120ml bottle, equivalent to R2.90/ml.
This is the first instance I am aware of where we have a tax being imposed on a product that isn’t even legally recognised. That’s because the sin tax on vaping products comes into effect from June 1, 2023, even before the Tobacco Products and Electronic Delivery Systems Control Bill, which regulates vaping products, has been passed into law.
But that looks like the least of the Fiscus problems.
Experts say the new tax could have the perverse effect of driving vapers to illicit products, in much the same way the government’s ill-conceived ban on cigarettes in 2020 during the hard Covid-19 lockdown allowed the black market for tobacco products to explode. To be honest, I don’t know of one smoker that quit during Zuma’s no-zol policy. And I’m a smoker myself.
The tobacco ban was imposed by the minister of co-operative governance and traditional affairs (Cogta) on May 28, 2020, under Regulation 45 of the national State of Disaster.
In May 2020, British American Tabacco SA (Batsa) requested urgent clarity on the decision-making process that led to the tobacco ban. Batsa’s court action against the Cogta minister was delayed and was heard only after the tobacco ban had been rescinded in August 2020.
The judgment was handed down in December 2020, and the tobacco ban was held to be unconstitutional.
Cogta was also not able to prove that the tobacco ban had any positive impact on health.
The government lifted the ban on the sale of tobacco products in August 2020, but Batsa said that “has done little to curb the illegal trade’s rampant growth”.
Batsa research indicated at the time that criminals had flooded South Africa’s retail market with illicit tobacco, citing a major study conducted by independent market researcher Ipsos.
And the government was warned that the Covid-19 ban would result in an increase in the illicit tobacco trade. But it didn’t listen and and it probably won’t now. This even after it showed that illicit trade significantly reduced government revenue and was provided with an extreme example of how dramatic the revenue losses could be.
The Conversation reported that during the 20-week sales ban, the government lost approximately R6 billion in excise duties on cigarette sales. “Most, if not all, tobacco companies continued to produce and sell cigarettes during the sales ban. No excise taxes were paid on these sales,” it said.
It is to be expected that the banks of bureaucracy will continue to bleed because of the rampant illicit activities such as trade in illicit tobacco and related products. South Africa has a long-standing market for illicit cigarettes, by some estimates potentially the world’s largest black market for cigarettes. Throwing vaping into the mix won’t be a hard sell at all.
This is despite the government taking recent steps in rooting out such corruption. It increased the number of successful cases against serious organised crime and recovered R8.2bn in revenue from criminal and illicit economic activities in the 2021/2022 financial year.
This was according to a recent report, Transnational Alliance to Combat Illicit Trade, Organised Crime, Corruption, and Illicit Trade: Spotlight on South Africa, which was recently published by Business Unity South Africa, which also stated that it was not close to enough to address the growing problem of illicit trade, especially after the growth in illegal alcohol and cigarette trade during the lockdown. And the new sin tax on vaping products could have a further perverse effect of driving vapers to illicit products.
“This tax is (also) going to wipe out a lot of small vaping businesses, and there is already evidence that it is promoting a black market for vaping products,” Kurt Yeo, the founder of consumer advocacy group Vaping Saved My Life’, told the Citizen recently.
Yeo said the government had made the fatal error of lumping vaping products into the same basket as cigarettes and other forms of tobacco.
“Many people, like myself, took up vaping as a way of kicking the smoking habit,” he added.
That being said, this week, on May 31, the World Health Organization, a day after the end of the 76th World Health Assembly, commemorated World No Tobacco Day.
“The tobacco epidemic is one of the biggest public health challenges the world has ever faced, killing more than eight million people around the world every year,” the WHO stated in a media release.
“While the number of people using tobacco products is decreasing in other parts of the world, it is rising in the Africa Region. For example, the number of tobacco users in the WHO African Region increased from an estimated 64 million adult users in 2000 to 73 million in 2018. This is partly due to the increased production of tobacco products as well as aggressive marketing by the tobacco industry.”
If the numbers are anything to go by, bureaucracy has made the problem worse. But in local politics, whether, it is booze or bongs, being seen as having the right intentions is many times more important than the ultimate result of the act.