Smokers may therefore be shocked to learn that since
1997 it is the tobacco companies and not the finance ministry that has been the main cause for increases in excise taxes. Cigarette prices have risen sharply in recent
years because it is the industry and not Minister Manuel who is milking smokers.
The current excise tax system allows the industry
to determine the size of the tobacco tax increase. Of the 52 cents increase in
tobacco excise taxes on 20 cigarettes announced today, only 17 cents of the
increase is due to a policy change by Minister Manuel, the remaining 35 cents is
entirely due to price hikes by the cigarette manufacturers.
Since 1997 the government has set the tax rate
at 50% of the retail price of a packet of 20 cigarettes. (This was revised
upward to 52% in last year's budget.) If the tobacco companies had not increased
their own prices then the excise tax would not have increased. The tax has
simply passively followed price hikes by the tobacco industry. The
Council, nonetheless, welcomes the tax increase announced today. It is good for
both public health and state revenues.Perhaps
the main benefactors of the tax hike will be the poor. The increase will
contribute to reducing poverty in South Africa. Poor households spend about four
percent of their money on cigarettes. Money that could be used on food, shelter
and children's education instead goes up in smoke.
Research shows that poorer people are the most
likely to quit when cigarette prices go up. Making
cigarettes less affordable is also the single best way to ensure that children
do not start smoking. The budget will prevent more children from becoming
addicted to nicotine than all the doctors in South Africa combined. The
tobacco industry will react to the increases in knee-jerk fashion, claiming that
the tax increases will cause job losses and an increase in smuggling. They will
conveniently ignore their own role in pushing prices up.
For further information please contact:
Dr Yussuf Saloojee, Executive Director, 011 643
(Source: Media release, February 23, 2005)