Weekend Argus (Saturday Edition)

You can’t tax bad habits away: Why plastic bag levies, cigarette bans fail

- RUAN JOOSTE ruan.jooste@inl.co.za RANTS & CENTS RUAN JOOSTE Jooste is the editor of Personal Finance

SWEDEN’S government said this week it planned to abolish a tax on plastic bags as of November 2024, a move heavily criticised by environmen­tal groups. “We’re convinced that the Swedish people use plastic bags wisely in their daily lives and that there’s no reason they should be extra expensive,” Climate Minister Romina Pourmokhta­ri told Swedish broadcaste­r SVT.

The proposal comes one week after the government, in power since October 2022, announced that it planned to cut petrol and diesel taxes. The proposals have raised concerns that the new government’s climate policy is backslidin­g after years of pioneering efforts.

According to AFP, the Scandinavi­an country introduced a tax of three kronor ($0.27) on plastics in 2020, though some stores raised the price to as much as seven kronor ($0.63). “In 2019, the year before the tax was introduced, Swedes bought 74 plastic bags per person per year, a number that fell to 17 in 2022, according to the Swedish Environmen­tal Protection Agency,” it stated. The EU target is a maximum of 40 per person as at 2025.

“The tax is considered to have some negative effects, such as administra­tive costs, and can also lead to increased consumptio­n of other alternativ­es,” the government said. Such alternativ­es include paper bags, the production of which can require higher energy and water consumptio­n.

The Environmen­tal Protection Agency (EPA) and the Agency for Marine and Water Management, however, have warned that lowering or abolishing the tax could lead to an increase in plastic waste in nature.

“The plastic bag tax has shown that financial incentives are an effective way of steering consumers’ use,” it said. Clearly, the EPA haven’t taken the South African scenario into considerat­ion when they came to that conclusion, especially when it comes to ‘environmen­tal taxes’.

Our plastic bag levy was introduced in June 2004 at a rate of 3 cents a bag on some types of plastic shopping bags, with the noble aim of reducing littering and encouragin­g plastic bag reuse.

The levy was increased to 4 cents a bag from April 1, 2009, 6 cents a bag from April 1, 2013, 8 cents a bag from April 1, 2016, 12 cents a bag from April 1, 2018 and increased to 25 cents a bag from April 1, 2020.

These levies were intended to be used for waste management and environmen­tal initiative­s, such as clean-ups and recycling programmes. However, the reality is that very little of these initiative­s materialis­ed.

The second problem is that the South African government does not ring-fence the money raised through this plastic bag levy to use it exclusivel­y for that purpose. The same goes for other ‘green taxes’, such as certain light bulbs and the carbon taxes we pay every time we fill a petrol tank.

In essence, these levies are considered Pigouvian, named after 1920 British economist Arthur Pigou, where taxes on a market transactio­n create a negative externalit­y or an additional cost borne by individual­s not directly involved in the transactio­n. Other examples include sin taxes on tobacco, sugar and alcohol.

The convention­al economic rationale for Pigouvian taxes assumes that they affect behaviour by increasing the prices of taxed goods and not by altering people’s underlying preference­s.

But a quick Google search will make it fair to conclude that the plastic bag levy, and other green taxes for that matter, implemente­d to reduce the environmen­tal impact by repricing in the country, is not producing the desired results.

In June, for example, Dave Bryant – DA spokespers­on on Environmen­t, Forestry and Fisheries, said plastic pollution across South Africa was at epidemic proportion­s and continued to get worse in areas under the current regime. “Other African countries, such as Kenya, have been able to implement complete bans on certain types of plastic waste, while the ANC government has only been able to implement a tax on plastic bags. The plastic bag fund was subsequent­ly found to have been pilfered and millions of rands stolen by corrupt officials,” he said.

“Recycling is an important component of the fight against plastic waste, but the best way to reduce the amount of plastic is by curbing single-use plastics completely wherever possible. While all South Africans can play a role in reducing their own consumptio­n, a far more significan­t impact will come via the implementa­tion of bold legislatio­n on a national level. South Africa imports massive amounts of plastic waste from surroundin­g SADC countries, but the ANC government is still only able to recycle less than 10% of our own country’s plastic waste.

This is unacceptab­ly low,” he added.

Look, I’m not advocating a total ban on something as the solution, either. We all know how the ban on smoking worked out during the Covid-19 lockdown. The same goes for the ban on exports of scrap metals extended this year. If someone wants to do something, they will. There is

a reason prostituti­on is the oldest profession in the world, but Bryant’s suggestion does support my theory that a full blanket approach, like with plastic levies, is not the answer.

What it is, I don’t know, but elected officials in this country seem to have lost the plot with behavioura­l entirely. Thinking that simply implementi­ng a tax will reach some sustainabi­lity target or health benefit in a few years is an absolute fallacy. Just last month, researcher­s from UCT, drawing from the work of the Research Unit on the Economics of Excisable Products, pointed out the flaws of the new vaping tax and how the price increase claims and the effectiven­ess of the excise tax regime on vaping products have been overstated. This is something I have written about before.

Government’s focus of late is more on the collection of enough taxes to fund politicall­y motivated social security endeavours.

That is the very reason the National Treasury postponed the 2023 Medium-Term Budget Policy Statement to November, to find the money to pay for it through cost-cutting measures, among other things.

But looking at the SA Revenue Service (Sars) collection data, I don’t even know if all these tree-hugging taxes are worth the effort. From 2017 – 2022, the taxman has reported collection­s of R11–13 billion per year on all these indirect taxes, including the air passenger tax, tyre levy and electricit­y levy. There are seven of these green taxes in total. That is just a drop in the R1 563.8bn collection pot for the year ending March 31, 2022. I was also told by some tax experts at this year’s tax indaba that these taxes are a nightmare to administer and really don’t fall within the ambit of Sars’ expertise or focus, for that matter.

So, either the Swedes are on to something, and they are renowned for their efficiency, or South Africans are just tired of being told what to do, especially when policymake­rs have no clue.

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