South African E-Cigarette Tax Proposal Sparks Controversy

British American Tobacco South Africa has stated that any proposed consumption tax on electronic cigarette products should be uniformly applied to all "participants" to ensure fair competition and an equal competitive environment for all participants. Otherwise, electronic cigarette prices could double or more.

Tobacco giants, represented by Dianne Moyses, stated at the Financial Standing Committee that according to their own data, e-cigarette products account for less than 0.5% of the nicotine products market in South Africa.

However, there are too many retailers creating their own e-cigarette liquids.

According to Mouyis, many individuals are "DIY-ing" imported liters of nicotine liquid just to turn it into more small pod bottles, a tax-free product.

The National Treasury department has proposed an average consumption tax of R2.91 per milliliter for electronic cigarettes, with a 70:30 ratio between nicotine and non-nicotine elements.

Representatives have stated that in order to ensure taxation from this transaction, they worked with the Oxford Economics Research Institute and found that a tax rate of R1.45/ml should be the absolute ceiling for tariffs.

The representative stated that, taking South Africa's capacity into consideration, a tariff of 70 cents would be more appropriate.

Representing manufacturers and retailers, the South African Vapour Product Association's Asanda Gcoyi has issued a warning that taxes will drive up prices, resulting in a potential average price increase of 138% for e-cigarette products and a 36% decrease in consumption of e-cigarette oil.

The British American Tobacco Company emphasizes that a radical increase in consumption taxes will push consumers towards a growing illegal market.

The tobacco company has proposed the following changes to the country's electronic cigarette products:

It is necessary to introduce a consumer tax registration system for manufacturers and retailers – opening up the market to the South African Revenue Service (SARS).

Manufacturers will be required to label their e-cigarette products with nicotine volume measurements on their packaging. Currently, e-cigarettes are measured by the number of puffs they provide, but tracking should be based on the volume of nicotine in milliliters.

Implement a tracking system with a unique identification code for every product from day one.

Gcoyi added that the proposed tax raises concerns as there are flaws in the underlying rationale.

She stated that the scientific basis for taxation is inaccurate because the national Ministry of Finance believes that the electronic cigarette industry is attempting to undermine global tobacco efforts, while many international studies have actually shown that e-cigarettes are a less harmful alternative to traditional smoking.

She added that the purpose of the consumption tax is still unclear, as the Ministry of Finance has provided very few details on how it will benefit public health, and there is also insufficient research on the effects it will have on youth consumption.

Gcoyi argues that imposing a consumption tax would have significant unexpected and irrational consequences. One such consequence is that the proposed tariffs would make electronic cigarettes more expensive than traditional cigarettes, leading to illegal trade and going against the principle of harm reduction.

Subsequently, the Steam Products Association has called on businesses to oppose the consumption tax and has urged the Ministry of Finance to conduct further market research on their proposal's impact.

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