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Tobacco sector comes out smoking over proposed tariff

Tobacco sector is set to challenge proposed 100% tariff hike. Photo: Lucas Ledwaba

Gugulethu Khumalo

THE tobacco industry is set to challenge the proposed 100% tariff on tobacco products.

The industry has suffered due to the Covid-19-enforced ban on the sale of its products over concerns that it could worsen the effects of the deadly corona virus.
While government’s decision had good intentions and sufficient medical insight, the ban on the sale of tobacco and related products has not changed smokers’ attitudes towards smoking.
Instead, it created room for the illegal and illicit trade of tobacco products, many of which are not taxed and do not follow the state-mandated processes of quality assurance. The Congress of South African Trade Unions (Cosatu) expressed its support for a 100% increase in the tax on tobacco products. As the legal tobacco industry suffered under the hard lockdown resulting in virtually making no revenue, impacting on thousands of jobs and individual livelihoods, illicit tobacco traders thrived during this period with little to no regard for the law and prohibitions. 
The SA Tobacco Transformation Alliance (Satta) is however contesting the validity and fairness of the proposed tax. Satta is a collective dedicated to representing people who work in the tobacco farming, processing and manufacturing industries including small scale farmers and larger producers, and exposing illegal tobacco traders.
Satta’s says its initial research has found that several tobacco farms have closed completely, and many others not made any profit in this tobacco season ending August 2020 which has impacted the farmers and their families negatively.

It says Batsa has for this reason, subsidised some of the input costs in the season but the impact across the tobacco industry value chain has been profound – hitting farmers, producers, manufacturers and retailers alike.

Satta has slammed Cosatu’s assertion that the proposed the tariff increase is a way to curb the sale and distribution of illegal and illicit cigarettes.

The organisation argues this may instead will give smokers more reason to trade and buy illicit cigarettes at a fraction of the price.
According to Satta spokesperson Zachariah Motsumi, Cosatu’s proposed 100% tax increase on tobacco products is “completely misinformed”.
Motsuni says while legal tobacco has been allowed to trade under level one lockdown, the industry is still struggling to find its footing and not even three months into the eased lockdown restrictions, the tobacco industry has been hit with another tax that it cannot afford.

He warned that introducing a tobacco tax will add salt to the wounds of an industry that already has been suffering more than other industries in the country.
“Does Cosatu want to put thousands of people out of work, and force them to be social grant recipients? Over 290 000 people are dependent on the tobacco industry for their livelihood. Will Cosatu look after them when they are out on the streets? We think not,” Motsumi says.
In addition to the strain of the proposed tax, Motsumi says, the tariff will drastically drive up the price of legitimate tobacco products, which most South Africans will not be able to afford.

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