Challenges in Taxing E-Cigarettes and HNB Products in South Africa

According to South African media outlet allafrica, on January 7, it was reported that the electronic nicotine delivery systems (ENDS) or e-cigarettes, as well as heat-not-burn (HnB) products, have presented a challenge to the tax regime of the South African government. Economists and medical health experts have differing opinions on the design of tobacco and nicotine taxation.

South Africa has become a case study that reflects the global disparities as the country reevaluates its taxation policies on tobacco and nicotine.

Marius van Oort, an associate professor at Teplya University, has pointed out that although e-cigarettes and HnB devices do not contain tobacco, they still contain addictive nicotine. Therefore, whether it is appropriate to apply the same tax rate to these products, which are different from traditional combustible tobacco, remains uncertain.

In a recent paper, Van Oort argues for the implementation of risk-based tax rates, which would set tax rates based on the degree of harm various products pose to health. This would require reliance on scientific evidence. He points out that governments need to balance several aspects when setting tax policy, including ensuring sufficient tax revenue, reducing negative health impacts, promoting economic and social development, and gaining political acceptance in a democratic society.

South Africa stands out as a noteworthy case, due to its significant income and wealth inequality issues, underperforming public healthcare system, and high prevalence of non-communicable diseases, particularly among low-income populations. Farnsworth ultimately suggests that given South Africa's current economic situation and health needs, implementing taxation based on the risks associated with tobacco and nicotine products may be the most appropriate strategy.