Tax Justice South Africa released a statement on Saturday saying that while Minister of Finance Tito Mboweni did not hike sin taxes as much as expected, it lacked adequate measures to combat take dodging companies in the tobacco and alcohol industries.
During his Budget Speech this past Wednesday, Mboweni announced price hikes for alcohol and tobacco products including 8 cents for a 340ml can of beer, 14 cents for a 750ml bottle of wine, R2.89 for a bottle of 750 ml spirits, including whisky, gin or vodka and 74 cents for packet of 20 cigarettes.
"In line with Department of Health policy, we will start taxing heated tobacco products, for example hubbly bubbly. The rate will be set at 75% of the rate of cigarettes. Electronic cigarettes, or so-called vapes, will be taxed from 2021," said Mboweni.
Tax Justice South Africa head, Yusuf Abramjee said Mboweni's hikes on alcohol and tobacco duties would enable "criminals in the dark economy" to raise their prices accordingly and profit even more than before instead honouring their tax obligations.
"The massive scale of illicit trade means that the 74% increase in a packet of cigarettes alone is worth an extra R300 million a year to counterfeiters and smugglers. Crooks selling illicit alcohol and fuel are enjoying similar windfalls," said Abramjee.
Abramjee said while sin taxes were effective as deterrents of unhealthy consumer patters and sources of revenue these taxes are often evaded by criminals in the illicit trade there is no benefit for the fiscus.
"A crackdown on illicit trade is long overdue. These criminals are systematically looting R100 million a day from the State by stealing taxes across multiple sectors. Those taxes should be spent on education, policing, health care and other essential services. Instead, they're making crooks rich and even funding other criminal enterprises," said Abramjee.
The Tax Justice SA statement said Abramjee would chair a press conference in Johannesburg on Monday to highlight the impact of illicit trade on the economy and revenue collections.