SA Could See Another Raise in Illicit Trade Due to New Vape Tax

Taking place at the latest Vaping Conversations diginar of 2020, the discussion around the repercussions of a vape tax followed an announcement by Finance Minister Tito Mboweni, that e-cigarettes and vaping products will be taxed from 2021. Now that the impending Control of Tobacco Products and Electronic Nicotine Delivery Systems (COTPENDS) Bill is fast approaching, concerns around it are on the rise

VPASA, has naturally together with tobacco harm-reduction experts, been long explaining to local authorities that a tax on this product category would be counterproductive to local smoking rates and therefore public health.

The event audience members included government stakeholders, parliamentary representatives and harm reduction advocates. Amongst those voicing the concern at the diginar was Arshad Abba, a partner at management consultancy Quantum Logik Consulting and the lead on the 2018 Canback study on vaping and its economic impact in South Africa.

A tax on the products could destroy the vape industry

Abba warned that imposing the tax could “destroy this category of product”, viewed in many markets as a harm-reduction alternative to cigarettes. “We also note that the relative price of e-cigarettes is directly related to the price of cigarettes. So when cigarettes are priced significantly higher than e-cigarettes, the market flourishes. And if e-cigarettes are priced too high due to taxes, the market declines,” he said.

No excise tax should be imposed on tobacco harm reduction products, just like a tax would not be imposed on masks protecting from Covid.

A media release highlighted that Abba was among the high-profile panel of speakers sharing the platform with moderator Dr. Delon Human, co-chair of the Africa Harm Reduction Alliance (AHRA), and fellow speaker Professor Donato Raponi, a freelance tax consultant and an honorary professor of European Tax Law at the Ecole Supérieure des Sciences Fiscales in Brussels, Belgium. Raponi has been ranked amongst the 10 most influential people in the world in tax matters by the International Tax Review, on multiple occasions.

Raponi, who has worked as an academic in both the private and public sectors, broke down how a tax framework should be developed. “A tax system should be stable but flexible enough to take into account future challenges,” he said, adding that “..government bodies needed a clear vision on questions such as what to tax, why they impose a tax, what they want to tax, how they tax, how they collect tax, and how the tax will be controlled.”

“These points are especially important as the share of the market by vapour products is limited, meaning revenue from taxation would therefore also be limited,” he added.

E-cigs need to be treated as tobacco harm reduction products

A media release said that a consensus was reached, saying that no excise tax should be imposed on tobacco harm reduction products, just like they would not be imposed on masks protecting from Covid.

“Key takeaways from the diginar included a consensus that no excise should be levied on vapour products as it is a harm reduced product similar to that of a mask being worn to prevent contracting COVID-19. However, if excise were to be applied, it should be:

  • Managed within a clear, standalone category after an extensive socio-economic impact assessment has been conducted,
  • Set at a rate that reflects the potentially lower-risk profile of vaping, which has been scientifically proven to be a harm-reduced product,
  • Levied only on nicotine-containing solutions and not on the device, and
  • Should not be linked to nicotine concentration.”

Taxes should be relative to risk

VPASA CEO, Asanda Gcoyi, highlighted the importance of considering the risk continuum when taxing vaping products. “The importance of looking at a risk continuum tax where harm-reduction products are concerned is imperative. While the vapour products industry is 100 percent in favour of legislation, we must ensure that conducive environments are put in place for an excise duty to be imposed on an industry.”

“It will be of no help to the millions of smokers, or the country’s fiscus,for an excise duty to kill the industry before it has even begun to make an impact in the lives of those looking for less harmful alternatives to combustible cigarettes.”

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