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Press Release

Cigarette ‘sin’ tax hike will be benefit scheme for criminals

Thursday 5 May, 2022 – CALLS to hike cigarette ‘sin’ taxes risk backfiring badly and simply boosting the fortunes of criminal manufacturers who are already stealing R19 billion a year from the state, Tax Justice SA (TJSA) warns today.

“Tax academics who are proposing an increase in tobacco excise rates seem in denial about the fact that South Africa is catastrophically losing the war against illicit cigarettes,” says TJSA founder Yusuf Abramjee.

“To raise sin taxes now will just drive even more smokers to the illicit market and increase the profit margins for the criminal manufacturers who are already looting our nation of desperately needed revenue.”

Professor Corne van Walbeek, of the research unit on the Economics of Excisable Products (Reep) at the University of Cape Town, makes his call for higher excise rates in a study published this week about the disastrous effects of the lockdown sales ban on tobacco products.

“In the very same study, Prof van Walbeek and his team concede that the lockdown ban allowed rogue manufacturers to seize control of the cigarette market and they are now more entrenched than ever,” says Abramjee.

“Yet these academics refuse to acknowledge that the criminals didn’t pay taxes during the ban, aren’t paying taxes now and won’t pay taxes when they’re raised.”

Market researchers Ipsos have found that shops nationwide are currently flooded with illicit tobacco, with tax-evading cigarettes openly on sale in up to three-quarters of stores in hotspot provinces.

“The harsh reality is that an increase in excise rates will simply be another benefit scheme for the illegal syndicates who are currently stealing R19 billion tax revenue every year,” says Abramjee.

“That’s vital money that could pay the full repair bill for the KwaZulu-Natal floods, plus relief grants for half a million victims for a year.

“Instead of creating opportunities for even more money to be stolen, policymakers should start devising ways to collect what is owed to the South African people. We need to stop the rot, catch the tobacco tax looters and lock them up.”