Tuesday, 16 April, 2024
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‘Vape tax’ could double prices and result in illicit market boom

The Vapour Products Association has called on businesses to oppose the government’s proposed excise duty and for Treasury to conduct further market research, saying the tax would increase the average price of vape products by 138%, while British American Tobacco (BAT) believes an excise tax would divert consumers to an illicit market that would mushroom.

BAT South Africa said that the proposed excise duty on vaping products should be imposed on all “actors” equally to ensure fair competition and an equal playing field for all participants – however, prices would rise, it warned.

Addressing the Standing Committee on Finance, the tobacco giant represented by Dane Mouyis said that according to its own data, electronic vaping products account for less than 0.5% of the entire nicotine product market of South Africa, reports BusinessTech.

However, there is an over-proportioned number of retailers who are creating their own vaping liquid.

Mouyis said that many people are “doing it themselves”, importing a few litres of nicotine liquid only to turn it into many more vials of vape liquid – an excisable product.

Under National Treasury’s proposal, the average excise rate for e-cigarettes is proposed at R2.91 per millilitre and apportioned in a ratio of 70:30 between nicotine and non-nicotine elements.

To ensure that tax is gathered from this trade, Mouyis said that in collaboration with Oxford Economics, it was found that a rate of R1.45/ml should be the absolute upper limit of the duty.

The representative said that considering South Africa’s affordability, a 70 cents duty is more appropriate.

Asanda Gcoyi from the Vapour Products Association of SA, which represents both manufacturers and retailers, warned that the tax would create a hefty price increase for consumers, with the average price of vape products potentially increasing by 138% and e-liquid consumption dropping by 36%.

Gcoyi echoed BAT’s statement that this would result in a growing illicit market.

The tobacco company proposed the following changes for vaping products in the country:

• A registration system to be introduced with the excise for manufacturers and retailers – to open the market up to the South African Revenue Service.
• Make ml of nicotine labelling on outer product packaging mandatory. Vapes are currently measured by the number of pulls they offer but should be tracked in terms of ml of nicotine.
• Implement a track-and-trace system with a unique identity code per individual product from day one.

Gcoyi said the rationale behind the proposed tax was flawed, that the scientific basis of the tax was inaccurate because National Treasury viewed the vaping industry as attempting to undermine global tobacco efforts – while many international studies have highlighted vaping as being a harm reduction practice dissimilar to traditional smoking.

She added that the goal of the excise was unclear as the Treasury has provided little detail on how it would benefit public health, and not enough research has been concluded on youth uptake.

The excise would have significant unintended and irrational consequences, she warned, one being that the proposed duty would make vaping more expensive than smoking and create an illicit trade – thus going against the doctrine of harm reduction.

 

BusinessTech article – Proposed ‘vape tax’ could see prices more than double in South Africa (Open access)

 

See more from MedicalBrief archives:

 

Vaping products make significant economic contributions – VPASA study

 

Calls for vaping products to have health messages – and separate regulations

 

Vaping industry exploits SA’s policy gap, enticing more to young people to smoke

 

Will proposed new tax policy curb popularity of vaping?

 

SA plans new e-cigarette and vaping rules

 

 

 

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