‘Hubbly bubblies’ and heated tobacco products to be taxed
New category will be calculated at 75% of the cigarette excise rate
The government will start taxing heated tobacco products with immediate effect, and plans to start taxing electronic cigarettes next year as part of the so-called “sin taxes”.
This was disclosed in the 2020 Budget Review tabled by finance minister Tito Mboweni on Wednesday, in which smokers and drinkers were once again told that they would pay more for their vices.
Heated tobacco products produce aerosols that contain addictive substances and other chemicals, which are inhaled by users. It currently does not form part of the products that fall under excise duties.
The Budget Review said a new category would be introduced for heated tobacco products in the schedule for excise duties. It will be taxed at a rate of 75% of the cigarette excise rate with immediate effect.
“In line with the department of health policy, we will start taxing heated tobacco products, for example hubbly-bubblies,” Mboweni said in his budget speech on Wednesday.
While SA faces a huge revenue gap, excise duties on alcohol and tobacco will — for most products — increase only by an amount that matches the expected inflation rate of 4.4% for the 2020/2021 budget, and 6% in the case of sparkling wine and 7.5% for pipe tobacco and cigars.
Excise duties will rise 74c from R16.66 for 20 cigarettes to R17.40 for 20 cigarettes in the 2020/2021 budget.
A 750ml bottle of spirits such as whiskey, gin or vodka will rise R2.89, while a can of beer will cost 8c more, a bottle of wine will cost 14c more and a 23g cigar will cost R6.73 more. There is no increase on the excise duty on traditional beer.
Ahead of the budget, the SA Liquor Brand Owners Association (Salba), a trade association representing alcohol manufacturers and distributors, called on the government to increase excise duties only by the rate of inflation.
Referring to electronic cigarettes, Mboweni said in the Budget Review that they were different to heated tobacco products, as they did not contain tobacco, but did contain nicotine and other chemicals, and that they were currently not taxed.
“Government intends to tax electronic cigarettes in 2021,” he said in the budget.
In terms of other sin taxes, the government proposes to double the plastic bag levy from 12c to 25c a bag from April 1. The increased plastic bag levy is budgeted to raise R250m for 2020/2021.
“We remain extremely concerned about plastic bags throughout the length and breadth of our country,” Mboweni said.
A review of the current levy, including a clarification of the tax treatment of compostable bags, will be undertaken, according to the Budget Review.
It says that while progress has been made in the domestic environment with regard to plastic pollution, it remains a huge problem, especially for marine life.
The Treasury will consult on extending the current levy on plastic bags to all single-use plastics used for retail consumption, including plastic straws, utensils and packaging. Any changes will be implemented in 2021. The process would be likely to involve further consultations with stakeholders, and would also require complementary legislation.
The fuel levy will be adjusted for inflation. The government proposes that the general fuel levy increase 16c/l, and the Road Accident Fund (RAF) levy 9c/l. Both increases will be effective from April 1.
Mboweni said despite the increase, the RAF’s liabilities were forecast to exceed R600bn by 2022/2023. “We need to take urgent steps to reduce this risk to the fiscus and bring a more equitable way of sharing these costs,” he said.
One way could be to introduce compulsory third-party insurance, he said.