Will smoking and vaping taxes change in South Africa?

The government must find a middle ground between the viewpoints of economists and health experts and risk-based taxes are being advocated by many.

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WHAT ARE RISK-BASED TAXES?

Risk-based taxes entail setting tax rates based on the risk to health by relying on scientific evidence. 

Marius van Oordt, an expert in indirect taxation in developing countries, is in favour of risk-based tax rates on tobacco and nicotine, according to Business Tech. “South Africa represents an interesting case for applying risk-based taxes,” said Van Oordt. He said that risk-based tax rates as opposed to broad tax rates on tobacco and nicotine products may be SA’s best option to address an under-performing public healthcare system.

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CONFLICTING INTERESTS 

According to The Conversation Africa, the government faces conflicting interests including:

• collecting sufficient tax revenues and limiting negative health consequences (which generally calls for high tax rates),
• the need for positive economic and social outcomes, and 
• the need for political acceptability (which often means lower taxes and valuing individual liberty).

“Risk-based excise taxes are an attempt to balance the interest of economists, health experts and governments,” argued Van Oordt.

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ECONOMISTS VS HEALTH EXPERTS

Economists and health experts have different, and often conflicting, views on how tax rates should be determined for nicotine products.

Economists tend to value economic outcomes and individual liberty, while health experts tend to put health outcomes above economic outcomes. More generally, health experts are in favour of high tax rates and regulations on nicotine products to eliminate or limit negative health consequences.

Health experts see the role of governments differently from economists. They are of the opinion that it is the responsibility of the government to limit negative health outcomes. They value consumer liberty less than economists. For economists, the emphasis is on the economy and not as much on whether the consumer’s decision is healthy or not. Economic effects and individual freedom are prioritised by economists.

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