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COULD THE CIGARETTE BAN FORCE SOUTH AFRICA INTO A TAX INCREASE?

COULD THE CIGARETTE BAN FORCE SOUTH AFRICA INTO A TAX INCREASE?

Finance Minister Tito Mboweni

The cigarette ban has, by many accounts, been a disastrous policy rolled out by the government. Whatever merits there are for limiting the sale of smokes, they have been mitigated by the numerous court challenges and communication fiascos that have dogged Parliament since tobacco was taken off the shelves.

However, with a billion-rand industry suddenly being brought to a crushing halt, there was always going to be consequences.

The cigarette ban has left an enormous tax-revenue hole, presenting the Treasury with a major headache.What’s more, Tito Mboweni has to deliver his emergency budget speech on Wednesday  and the finance minister might have to think about doing the unthinkable.

COULD THE CIGARETTE BAN FORCE SOUTH AFRICA INTO A TAX INCREASE?

Tax Justice South Africa are vocal critics of the prohibition on tobacco.

The group estimate that R35 million each day is being lost in tax revenue to the prolonged cigarette ban, a figure they say could pay the wages of 50 000 nurses.

Elaborate comparisons aside, they believe this loss of earnings could force many South Africans into making up for the losses via increased taxes elsewhere.

“Get ready to pay for the decision by the South African government to throw away over R3 billion in cigarette taxes. The tobacco ban during lockdown has diverted that money to criminals in illicit trade. Now decent South Africans are expected to plug the gap again…”  Tax Justice SA

Meanwhile, Charles de Wet, PricewaterhouseCoopers partner, told Business Insider that the government may want to target another increase to the fuel levy, or they could even go for a ‘wealth tax’ option, which would ask the highest earners in South Africa to part with a few more of their funds.

Until Tito Mboweni takes to the podium and reveals what he’s got in his magic red folder, nobody can say for sure what direction the finance minister will take us in. He’s walking the narrowest of all tightropes, and will be under pressure to both toe the party line and announce radical changes that can bolster our ailing economy.

But with an estimated 10 million smokers in South Africa, a bustling industry, controversial yet profitable, is now bleeding money.

If we can’t get cigarettes back, Mboweni may have to take drastic steps to raise capital elsewhere.

Source: Thesouthafrican / Tom Head

Photo Credit: Gallo Images


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