The announcements made in the Minister of Finance Tito Mboweni’s National Budget Speech took some economists and consumers by surprise. However, one constant in every budget speech is that taxes on tobacco and alcohol always increase.
According to SARS, the primary function of these duties and levies is to ensure a constant stream of revenue for the state, with a secondary function of discouraging consumption of certain harmful products.
Why government places such heavy taxes on these risky products
Smoking remains a leading cause of premature, preventable death in South Africa. According to the Cancer Association of South Africa, tobacco kills 44 000 South Africans every year, which is three times more than motor car accidents, and six million worldwide.
The Western Cape alcohol-related harms reduction policy white paper in 2017 says that the financial cost of alcohol-related harms to the economy was estimated at a net loss of between R165 billion and R236 billion.
Liberty’s Chief Medical Officer, Dr Dominique Stott says, “The reality is smoking and excessive drinking can cause life altering illnesses like lung cancer and heart disease.”
Loading for smokers
Long-term insurers load the insurance premiums of smokers because they are at a higher risk of contracting severe lifestyle-related illnesses. The price difference in premium rates varies due to a range of factors. However, smokers can pay nearly twice as much as non-smokers.
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 one thing is certain – if you continue to smoke and drink, you’ll end up paying for it.
So, if you’ve been thinking about changing your lifestyle by eliminating your vices, perhaps now is the best time to do it. It will make a difference in your health and lifestyle as well as your financial well-being.
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