Call for Mboweni not to increase tax on cigarettes in budget

The recently launched Black Tobacco Farmers Association (BTFA) yesterday called for government to keep excise taxes at their current level as Finance Minister Tito Mboweni will table his maiden budget tomorrow.

BTFA said their call to action was inspired by the incapacity of the South African Revenue Service (Sars) to effectively tackle the illicit trade of cigarettes in order to protect farmers from the threat of job losses.

Leading independent economists have found that revenue collections from taxes on cigarettes have declined sharply in spite of successive rate hikes.

Research house Ipsos reported in November 2018, that Sars was losing at least R8 billion annually due to illicit cigarettes.

Econometrix found that income from tobacco excise declined by R1.94 billion between 2015-16 and 2017-18.

Ntando Sibisi, BTFA chairperson, said illicit trade, as well as an impending threat to increase excise taxes, posed a risk to the entire tobacco value chain, especially emerging farmer programmes that have developed small-scale tobacco farmers.

“We just want to add our voice and request the minister ahead of him tabling his budget that we would like to see a Sars that will take tackling the illicit trade of cigarettes more seriously before excise taxes are increased further,” Sibisi said in a statement.

“At this stage, more excise duties will do nothing but cause the illicit economy to grow even more. Under the current economic conditions, an excise increase will force more consumers to go for cheaper, nontaxpaying, cigarettes.”

Sibisi said illicit trade was partly caused by high excise taxes and was killing any progress that black farmers have made over the years to create jobs and maintain jobs.

Sibisi said the illicit cigarette trade places more that 10 000 jobs at risk and deprives South African taxpayers of R25 million in lost taxes daily.

“We urge law enforcement agencies to clamp down on the illicit cigarette trade,” he said.