Wednesday 17 February 2021 – ANY increase in ‘sin’ taxes in the annual Budget next week would backfire badly by enriching criminals in illicit trade, destroying livelihoods and even reducing the amount of money that is collected to salvage our crippled economy, Tax Justice SA warns today.
Finance Minister Tito Mboweni will deliver his Budget speech next Wednesday (February 24), with South Africa facing near-record levels of unemployment and economic hardship while still battling the Covid crisis.
TJSA founder Yusuf Abramjee says: “While honest citizens have suffered immeasurably during the pandemic, criminals in the illicit economy have been getting rich.
“Whatever their purpose, the bans on the sale of cigarettes and alcohol boosted the fortunes of operators in the black market, while sacrificing more than R20 billion in unpaid excise taxes.
“To try to recoup those lost ‘sin’ taxes with a hike in rates now, would be a kick in the teeth for consumers.
“Illicit networks have become firmly entrenched and they will simply become more attractive to hard-up South Africans if Minister Mboweni forces up prices on the legal market.
“The criminal sector will grow, honest jobs will be lost and the Treasury will end up with an even bigger hole in its coffers.”
A TJSA investigation in December revealed that illicit tax-evading cigarettes are now on open sale in mainstream outlets across the country.
It is costing the Treasury R8 billion a year in unpaid excise taxes alone.
“If he’s looking for more money, Mr Mboweni should start by squeezing criminals in illicit trade to hand over the billions that they’re looting,” says Abramjee.
“A crackdown on the illicit economy could retrieve vital funds to help struggling families, feed the starving and save lives. A hike in ‘sin’ taxes would add insult to injury for those same families and serve as yet another indication that, in South Africa today, crime pays.”