SA’s ‘sin tax’ to hit Eswatini consumers
MBABANE – If you smoke or drink, prepare to pay more as South Africa increased the ‘sin tax’.
It would seem that the Minister of Finance, Neal Rijkenberg, who did not announce changes in taxes with the purpose of contributing to the improvement of the lives of emaSwati under the current economic and social realities, has already been defeated.
This is because the announcement by his South African counterpart, Finance Minister Enoch Godongwana, to increase the ‘sin tax’ has forced the Southern African Customs Union (SACU) to review the excise duty on alcohol and tobacco.
A dictionary definition of ‘sin tax’ is that it is an informative word to mean a tax on items considered undesirable or harmful, such as alcohol or tobacco.
Godongwane said the excise duty would increase by 6.7 and 7.2 per cent in 2024 and 2025, respectively.
Ultimately, this is set to lead to consumers of alcohol and tobacco products in Eswatini feeling the pinch when the prices increase.
EXPECTED TO INCREASE
In terms of money, a can of beer is expected to increase by 14 cents.
According to the South African publication Business Tech, a can of cider and alcoholic fruit beverage goes up by 14 cents; a bottle of wine will cost an extra 28 cents; a bottle of fortified wine will cost an extra 47 cents; a bottle of sparkling wine will cost an extra 89 cents; and a bottle of spirits, including whisky, gin, or vodka, increases by E5.53.
In South Africa, the tobacco excise duty increased by 4.7 per cent as well as 8.2 per cent for pipe tobacco and cigars.
Cigars are expected to cost E9.51 more, while a pack of cigarettes is said to increase by 97 cents and a pipe of tobacco by 57 cents.
Vapes were also not spared, as the excise duty on electronic nicotine and non-nicotine products increased from E2.90/ml to E3.04/ml, reflecting a 4.6 per cent increase.
Rijkenberg mentioned household income for the average liSwati, who is still under the pressure of the COVID-19 pandemic era.
According to the Eswatini Revenue Service (ERS) Integrated Annual Report, the alcohol and tobacco levy contributed E46.3 million of the overall E12.037 billion in total revenue in taxes.
Though there was an actual increment from 2021/22 of E43. 848 million, this was short of the target of E49.6 million, reflecting an actual variance of 6.8 per cent against the target.
Minister Rijkenberg confirmed these changes.
Rijkenberg, responding to a questionnaire, said South Africa’s tax increment will have an effect on the prices of imported products.
The minister said the Eswatini alcohol and tobacco levy charges a three per cent tax for domestically produced products and seven per cent for imported alcohol or tobacco.
He also said the levy is in addition to other taxes like value-added tax (VAT).
The alcohol and tobacco levy is one of 12 ERS-listed taxes, including company tax, VAT, and the fuel tax, among others.
While Rijkenberg had skipped announcing increments on taxes, by the time Godongwane made his budget speech five days earlier, which was on Wednesday, February 21, SACU member States, including Eswatini, had reviewed the excise duty on sin goods.
EXCISE DUTY IS COORDINATED
He said excise duty is coordinated under the SACU agreement, ‘which means that excise tax rates are the same in all five SACU member States’.
“These rates were reviewed when the minister of Finance in South Africa delivered the budget speech, and they affected all five countries, meaning that the increase in RSA was an increase here. The proceeds are shared amongst the countries as part of the annual determination of revenue shares,” Rijkenberg said.
Eswatini has already made the adjustments with the other five countries that trade with South Africa.
SACU members are Botswana, Lesotho, Namibia, South Africa and Eswatini.
Explaining what the sin tax is, he said it is a type of tax levied on specific goods and services that are considered to be harmful or costly to society.
He said these goods and services are often referred to as ‘sins’ because they are associated with negative consequences, such as addiction, health problems, or social issues.
Rikjenberg said such taxes are consumption taxes and, as such, are paid by the end consumer ‘even though it’s the producer or importer who remits them to the Eswatini Revenue Service (ERS)’.
In 2022, ERS was taken to court by the British American Tobacco Swaziland (BATS) (PTY), where it, among other prayers, sought an order for the declaration of the Alcohol and Tobacco Levy Act of 2019 to be inconsistent with the Constitution.
However, a full bench of the High Court dismissed the application by BATS, ruling in its judgment that the company failed to satisfy the court that the Act was irrational.
The matter was heard by a full bench of the High Court before Judges Mbutfo Mamba, Mzwandile Fakudze, and Titus Mlangeni.
INCORPORATED AND REGISTERED
BATS, a company incorporated and registered in Eswatini marketing and distributing British American tobacco products comprising Dunhill, Pall Mall, Rothmans and Peter Stuyvesant, had challenged the legislation that came into force on August 23, 2019.
The tobacco products are manufactured in South Africa by British American Tobacco South Africa (BATSA) and imported into the country.
The legislation provides for the imposition and collection of a levy on alcoholic drinks and tobacco products.
In June 2016, BATS submitted its comments to Parliament stating that the introduction of the levy would increase trade in illicit cigarettes.
BATS had estimated the illicit cigarettes to be between 24 and 30 per cent in the local market, which translated to an estimated annual loss in taxes of E17 million.
Respondents in the matter were the minister of finance and the Commissioner General of the ERS.
As an applicant, BATS failed to have the court order directing the ERS to repay it a sum of E6.3 million it purportedly paid as levies on August 23, 2019.
The attorney general, who was the second respondent in the matter, argued that the company had no claim over the E6.3 million as it was money paid as a levy by the consumers.