Matthew Lester: #FeesMustFall – Legalise dope? Sin taxes not the answer.

Sin tax is budgeted at R32bn for 2015/16, and that’s before the inclusion of VAT. And given the national #FeesMustFall crisis, Rhodes University tax professor Matthew Lester looks at it as a potential answer.

Lester says increasing tax collections has two components: higher economic growth rates and broadening the tax base. The first in highly unlikely so he looks at possibly extending the tax base.

The solution looks at legalising marijuana but the logistics are too complicated and it’ll create a ‘customs and excise administration problem of chronic proportions’.

Unfortunately Lester’s conclusion doesn’t lie in sin, it’s too complicated and dead in the water, before we even start. An interesting read that starts some interesting dynamics in the country. – Stuart Lowman

By Matthew Lester*

This suggestion flew through the internet last week. It doesn’t help much in the context of #FeesMustFall but it can start some interesting dynamics about SA.

Drinkers and smokers do their bit for SA. They really do. Sin tax collections are budgeted at R32bn out of a total tax collection of R1.1trn for 2015 to 2016.

And that’s before adding in the VAT on sin, corporate taxes on profits made from sin and personal taxes of employees within the sin. If SA moved to total prohibition we would increase the national debt to unsustainable proportions and SA would collapse.

Prohibition stopped in the USA, not only because it was unpopular. Prohibition cost mountains in resources to achieve partial enforcement.

So working on the sound economic principal of ‘turning theft into profit’ the USA found it was far better to increase the tax base, save on enforcement costs and forget about prohibition.

Matthew_Lester_chart

Read also: Matthew Lester goes back 30yrs: #FeesMustFall – where’s the private sector?

Sin tax rates result on an effective tax rate of 55% on cigarettes and booze. 11 out of 20 cigarettes are consumed for ‘volk and vaderland.’ And up to 17 tots in a bottle of 30 go towards fixing potholes.

SA sin tax collections are increasing annually by above the inflation rate. Even with all of this SA sin tax rates are below the international average.

Increasing tax collections really has two components. (1) Increasing economic growth rates (that’s just not happening at present) and (2) Broadening the tax base (looking for more income and expenditure to tax).

Screen-Shot-2015-11-09-at-11.43.18

So, Trevor the clever student will suggest that we can significantly broaden the tax base by legalising marijuana, taxing it heavily and allowing us all to grow in peace.

Could dopeheads pay for #FeesMustFall?  Nice ideal, but no ways. Just think of all the interesting aspects of tax that would come into play.

Read also: Matthew Lester: SETAs, UIF should be raided, then #FeesMustFall

First off, how would one tax dope? Cigarettes are taxed by the pack of 20. That’s easy enough. But bankies of dope vary hugely in size depending on the generosity of the dealer.

Booze is taxed by alcohol content. Those in the know tell me that dope has widely differing content of THC (that’s the stuff that blows the mind). So imposing the tax would be a substantial problem, just in measuring the THC content.

A huge component of the SA’s dope is not even grown in SA any more. Transkei Rooibaard or Durban Poison are no longer good enough for the SA connoisseur. They now talk about Skunk from Swaziland and Chronic from Malawi. Most of the good sh$t is hydroponically grown in neighbouring states.

Read also: Matthew Lester: #FeesMustFall – Widen tax exemption to R500k

So if we legalized dope we create a customs and excise administration problem of chronic proportions. Our customs officials are already struggling to combat contraband cigarettes. Add dope and the chaos would be complete.

Some say we could sort the problem out by awarding government contracts to approved and licensed dealers. Heaven forbid. The Guptas would get sole distribution rights, SA would have to smoke the stuff grown in India where there has been much fine research into rolling joints from animal manure.

Some say it looks like  a joint and they even burns like a joints. But it still tastes like sh$t.

Sorry, whichever way you roll the joint, sin will never pay for #FeesMustFall.

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