News Sin Tax will Affect Vapers, Smokers and Small Businesses as of Next Month
The Minister of Finance announced in the 2022 Budget that a tax net on vaping tobacco products will be introduced. The new sin tax will include nicotine and nicotine-substitute solutions in vaping products with the flat excise duty rate of R2.90/ml as of 1st June 2023. According to South African Revenue Service (SARS), the manufacturers
News Sin Tax will Affect Vapers, Smokers and Small Businesses as of Next Month
The Minister of Finance announced in the 2022 Budget that a tax net on vaping tobacco products will be introduced. The new sin tax will include nicotine and nicotine-substitute solutions in vaping products with the flat excise duty rate of R2.90/ml as of 1st June 2023.
According to South African Revenue Service (SARS), the manufacturers of these products are required to obtain a license for their manufacturing premises in respect of such products with SARS before 1st June 2023 and to submit their first excise duty account by 28th July 2023. Special storage warehouses in respect of such products should similarly be licensed with SARS before 1 June 2023.
Asanda Gcoyi, CEO of the Vapour Products Association South Africa (VPASA) believes that the tax on vape products could be double the price of the product itself.
R290 tax will be levied on a 100-millilitre bottle of vape juice, which costs R200, raising the price to R490 if all of the tax is passed on to consumers.
“What is perhaps not ideal is the rate,” she adds. “The R2.90/ml as an introductory rate, in our view, is too high.”
According to Kurt Yeo, cofounder of Vaping Saved My Life (VSML), “The tax will be detrimental to those using vaping to stop smoking as well as local small businesses – doing more harm than good.”
“At face value, the tax will move the consumer to the intended purpose of vaping less. But with many of those who vape having switched from smoking to this safer alternative and now having to pay far more for the privilege, they might be forced to revert to smoking as a cheaper option,” he stated. “Moreover, the excise overlooks that vaping is the most effective method for smoking cessation. So those who smoke and want to make the change will be dissuaded purely based on the price and will have to continue using the deadliest consumer product on the market, cigarettes.”
Yeo believes that the tax increase will push many vape shops and local manufacturers to shut down due to excise duty rate and customers not being able to afford the locally produced products. He added that the vaping industry contribute to the country’s economy and creates job opportunities.
“With the vaping industry contributing more than R2.49 billion to the country’s GDP, while also supporting 9,500 plus jobs, this will have knock-on effects not only on the livelihoods of employees and their families but the South African economy too. More concerning is the likelihood of yet another illicit trade forming, circumnavigating all forms of control and standards.”
“This excise will impact the hundreds of thousands of South Africans who rely on these products, many more who could benefit from them, and an entire industry dominated by small businesses. I urge National Treasury and the South African Revenue Services to take the recommendations proposed by the Select Committee on Finance seriously, which call for further research and a socio-economic assessment study to be conducted on the excise. Failing to understand the South African vaping market and its potential to achieve lofty public health goals has the makings of yet another lost opportunity to do something useful,” he concludes.
