Juul brand vaping products are seen promoted at a vape shop in Jakarta, Indonesia, on February 17, 2020. REUTERS/WILLY KURNIAWAN
Juul brand vaping products are seen promoted at a vape shop in Jakarta, Indonesia, on February 17, 2020. REUTERS/WILLY KURNIAWAN

The SA unit of cigarette group Philip Morris International has welcomed finance minister Tito Mboweni’s announcement of the introduction of excise tax on heated tobacco products, which is at a lower rate than that of cigarettes.  

The tobacco industry continues to face a rising number of challenges in SA, including increasing cigarette trafficking and an uncertain regulatory environment.

In his budget speech on Wednesday, Mboweni said that in line with department of health policy, the government will start taxing heated tobacco products, for example hubbly bubbly. The rate will be set at 75% of the rate of cigarettes.

Electronic cigarettes, or so-called vapes, will be taxed from 2021.

Marcelo Nico, MD of Philip Morris SA, said that by creating this differentiation, Mboweni and his team recognise the role that taxation can play in encouraging adult smokers to switch to less harmful tobacco products.

“The best choice any smoker can make is to quit nicotine and tobacco entirely. Those who would otherwise continue smoking should change to a less harmful alternative,” Nico said.

He said there is mounting evidence that regulating less harmful tobacco products differently from cigarettes can reduce smoking rates to the overall benefit of public health.

“Cigarette smoking is the most harmful form of tobacco consumption. Smokers deserve access to accurate information about less harmful alternatives. This new tax category is a step towards encouraging those who would otherwise continue smoking to change to less harmful alternatives,” Nico said.  

He said Philip Morris’s investment in smoke-free alternatives will rise to R650m this year.

Globally the company has made a public commitment to replace cigarettes with less harmful products as soon as possible. Philip Morris International states that these products now constitute 92% of its research & development budget, 60% of its global commercial spend and 20% of revenues just five years after commercialising.

The National Council Against Smoking (NCAS) also welcomed the tax on e-cigarettes, saying the move will reduce youth use of the devices and prevent them from becoming addicted to nicotine and later switching to cigarettes.

“This tax brings SA in line with countries such as Kenya which already have a tax on e-cigarettes,” NCAS executive director Savera Kalideen said.

“It is in line with recommendations from the World Health Organisation (WHO) as an effective way to reduce health harm. It is also in line with the World Bank’s recommendations to use tax on tobacco to reduce the health burden and bring in revenue to the fiscus.”

Kalideen said, however, the group was disappointed with the increase of just 74c per packet of 20 cigarettes. “The increase brings the excise tax to R17.40 per packet and people who smoke nine cigarettes on average a day will only spend an additional R122 for the year.”

The government has long been pushing for legislation meant to curb smoking. The Control of Tobacco Products and Electronic Delivery Systems Bill seeks to, among other measures, control and ban smoking in public areas, limit the display of tobacco products at point of sale and introduce plain packaging of tobacco products.

The health department says stricter tobacco laws will reduce tobacco use and prevent millions of people dying from tobacco-related illnesses such as heart attacks and strokes.

The WHO has backed stricter tobacco laws in SA, saying they are consistent with the country’s obligations under the Framework Convention on Tobacco Control and bring SA back to the forefront of international tobacco control best practice.

phakathib@businesslive.co.za

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