Freedom Front Plus
Freedom Front Plus

Revenue collection crisis deepens: Sin tax increase cannot be collected while tobacco and alcohol sales are banned

The adjustment budget that was tabled in Parliament in June by the Minister of Finance, Tito Mboweni, reflected an enormous deficit in revenue collection due to the Covid-19 lockdown. The consequent contraction of the economy also meant that many businesses and citizens could not earn an income and as a result, they cannot pay taxes.

The revised tax laws that the Minister announced in February and that were recently published for input from the public make provision for, among other things, an increase in excise duty levied on alcohol and tobacco products. This is ironic because as long as the ban on the sales of these products remains in place, the government cannot collect the increased excise duties.

The ban already costs the government approximately R35 million per day in taxes, which adds up to R3 billion per month; this deepens the revenue collection crisis that the country was already facing.

If the ban was not instituted in March this year, the government would have collected a significant amount in excise revenue. Although the general revenue collection crisis could not have been averted entirely, the collection of excise duties would have reduced the revenue deficit significantly.

South Africa is the only country in the world that totally banned the sale of alcohol and tobacco products. In many court cases, it was argued that the reason for implementing the ban is to reduce alcohol related trauma and breathing complications so as to lessen the pressure on hospitals treating Covid-19 cases.

That did not happen. This makes the government's reaction to the pandemic seem even more preposterous and it violates people's right to decide for themselves whether they want to consume alcohol and / or tobacco products.

The ban also has an immense impact on the survival and sustainability of links in the value chain in the two sectors. Many, many jobs have been lost due to a ban that should not have been implemented in the first place.

This gross violation of people's rights must come to an end immediately so that some of the remaining businesses and job opportunities can be salvaged and to mitigate the excessive reduction in service delivery, which will be an inevitable consequence of the revenue deficit, by means of tax collection.

Contact details: 082 674 6670



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