The costly long-term risk of sin-taxed products

ECONOMISTS and consumers eagerly awaited Finance Minister Tito Mboweni’s Budget speech. While some of the announcement took consumers and economists by surprise, the fact that sin taxes increased again was expected.

Why the government places such heavy taxes on these risky products?

The SA Revenue Service (Sars) hiked these duties and levies for two reasons.

The first is to increase revenue streams into state coffers and the second is sin tax.

Smoking remains a leading cause of premature, preventable death in South Africa.

According to the Cancer Association of SA, tobacco kills 44 000 South Africans every year, which is three times more than motor car accidents, and six million worldwide.

The 2017 Western Cape alcohol-related harms reduction policy White Paper says that the financial cost of alcohol-related harm to the economy was estimated at R165 billion to R236bn.

Liberty’s chief medical officer Dr Dominique Stott said: “The reality is smokers and drinkers are at higher risk of contracting life-altering illnesses like lung cancer and heart disease.”

Consumers without any medical aid to pay for the expensive treatments have no choice but to turn to government for their care.

Even long-term insurers add a premium for alcohol and tobacco consumption.

Long-term insurers load the premiums of smokers because they are at a higher risk of contracting severe lifestyle-related illnesses.

Smokers could pay nearly twice as much as non-smokers for their premiums.

Clients who smoke are offered smoker-related rates at inception of their policies but the option exists to change to non-smoker rates at a later stage if the client quits smoking.

There is no telling by how much sin tax will increase in future but if you continue to smoke and drink, you’ll pay for it.

A lifestyle change will make a difference to your health and financial well-being. |