South Africa has announced a further tax hike for tobacco products. The increases announced today are: Cigarettes 51 cent (10.1 per cent), pipe tobacco 15.9 cent (8.4 per cent), and fine cut (roll your own) 35.2 cent (4.70 per cent).

Commenting on today’s budget, Tobacco Institute CEO Francois van der Merwe expressed concern over the higher than inflation increase in tobacco excise duties.
“The excise tax alone on a pack of 20 cigarettes is R 5.56 from today," he said. "This excludes the VAT component which still has to be added. Consumers should therefore be careful to purchase cigarettes which are priced far below normal retail prices. Over the past ten years, excise duties on cigarettes have increased by nearly 440 per cent resulting in a drop of one-third in volumes of legal products over this period. However, over the same period the illegal trade in tobacco products has grown from almost non-existent to more than 15 per cent of the total market in the country. This translates into revenue losses for government of about R 1 billion per year. Over the past eight years, excise duties on pipe tobacco have increased by 880 per cent. These increases, together with an increase in the consumption of cheaper, illegal cigarettes, also resulted in a drop of one third in legal volumes of pipe tobacco over the same period."
Apart from losses to government, he went on, the illicit trade is seriously strangling the legal cigarette manufacturers, pipe and roll-your-own tobacco manufacturers and tobacco merchants. "Many job losses have occurred in the manufacturing industry. This in turn decreases the demand for locally grown tobacco which impacts negatively on tobacco farmers and jobs in rural areas. It is frightening to note that collectively, the illicit trade is already the third largest player in the South African market, ahead of large international companies who operate legally. Ever-increasing tobacco excise duties and over-regulation of the legal industry contributes to the growth in the illicit trade in tobacco products as consumers move away from legal products and buy much cheaper illegal tobacco products which carry no taxes and don’t comply with other legal requirements." (pi)