Sunday 2 August 2020 – Tax Justice SA (TJSA) has written a letter to President Ramaphosa pleading with him to lift the tobacco ban as court papers emerge destroying the Government’s case for the 18-week-old sales prohibition.
“The unintended consequences of this ban have caused harm that far outweighs whatever positive outcomes it hoped to achieve,” the letter states. “It is threatening livelihoods, rewarding illegal enterprises and eroding taxpayer morality.”
On Sunday, News24 reported that there are devastating contradictions in a vast 251-page response by government to the legal challenge to the ban, led by British American Tobacco SA, which will be heard in the Western Cape Division of the High Court on Wednesday.
Key among these is the admission that smokers are “less likely to be infected” with the coronavirus and develop Covid-19.
In more apparently inadvertent confusion, government argues that cigarette purchasing during lockdown has increased inter-personal contact – as compared with ordinary shoppers – without acknowledging its own ban on legal cigarette sales could be to blame.
Meanwhile, Michael Evans, attorney for the 10 applicants in the tobacco case, said on Sunday that the Government itself had shown that the cigarette ban would have “absolutely minimal” effect on medical services.
Even if it were true that smokers infected with Covid were at risk of developing more severe forms the disease, the Government’s own figures proved that only 16 ICU beds would be freed up by the ban – out of a national total of 3,500, Mr Evans, partner at Webber Wentzel, told CapeTalk radio.
“That is an absolutely minimal gain, because against that you have a massive impact on society,” said Mr Evans. “The entire tobacco industry has been affected and that’s not just big manufacturers, it’s small farmers and retailers as well. You’ve had a massive boost to the illicit trade and the fiscus has been deprived of R4 billion in excise duties.”
The TJSA letter says: “South Africa remains as the only country in the world outlawing tobacco in the fight against the virus.
“It appears hard to justify a ban that increases the threat of infection through sharing cigarettes, fuels illicit trade and robs the Treasury of an average R35 million a day in ‘sin’ taxes. This lost excise would pay the cost of the huge new IMF loan in just 20 days.
“At a time when South Africans should be uniting against unprecedented adversity, they are being told that crime pays.”
The letter in full:
30 July 2020
The President of South Africa
Mr. Cyril Ramaphosa
Your Excellency,
Eighteen weeks have passed since you first prohibited the sale of tobacco products.
Despite its honest purpose, the unintended consequences of this ban have caused harm that far outweighs whatever positive outcomes it hoped to achieve.
The latest research by eminent economists at the University of Cape Town shows that the ban has greatly exacerbated the very health risk it was meant to eradicate. Five times as many smokers are regularly sharing single cigarettes than they were before lockdown, thereby greatly increasing the danger of spreading the virus.
This increase in sharing is attributed to the current high cost of buying illegal cigarettes, which itself is evidence of another lethal consequence of the ban. Criminals in illicit trade have taken control of the market and experts estimate they are earning R3 billion a month selling illegal cigarettes at hugely inflated prices.
Tax Justice South Africa was established last year as a non-profit organisation to campaign against illegal trade across multiple sectors, from fuel to pharmaceuticals and from clothing to cigarettes.
Before lockdown, illicit trade was a massive drain on the South African economy, depriving the fiscus of an estimated R250 million every day. Under Commissioner Edward Kieswetter, SARS was beginning to claw back some of the ground that had been ceded to the illicit economy during years of mismanagement.
Now, tragically, the tobacco ban has given a new stimulus to the criminal tax evaders. Every day that the ban continues, their sophisticated networks become deeper entrenched and they use their ill-gotten earnings to fund other, even more sinister criminal enterprises.
The ban on alcohol sales has been another boon for illegal traders. However, TJSA appreciates that there are other factors at play here, including statistical evidence of the burden placed on medical facilities by alcohol-related trauma.
No scientific evidence showing a connection between smoking and Covid-19 has been presented and South Africa remains as the only country in the world outlawing tobacco in the fight against the virus.
Without such evidence, it appears hard to justify a ban that increases the threat of infection through sharing cigarettes, fuels illicit trade and robs the Treasury of an average R35 million a day in ‘sin’ taxes. This lost excise would pay the cost of the huge new IMF loan in just 20 days.
Instead, the ban is threatening livelihoods, rewarding illegal enterprises and eroding taxpayer morality.
At a time when South Africans should be uniting against unprecedented adversity, they are being told that crime pays.
We do not believe that this is your intention.
We humbly request that you lift the ruinous and failing ban on tobacco sales as soon as possible.
Yours sincerely,
Yusuf Abramjee
Founder, Tax Justice South Africa
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