Rates Bill & Tax Bills: Public Hearings

Meeting report

Public hearings on the TLAB, TALAB and Rates Bill

Life After Coal Campaign

Mr Brandon Abdinor, Climate Advocacy Lawyer, Life After Coal Campaign, presented the entity’s inputs on the Draft Tax Laws Administration Bill (TLAB) and the Rates Bill.

The main points of the presentation were:

• Increasing and more extreme natural disasters were occurring more frequently due to climate change.
• There was a strong and increasing need for financing to fund adaptations to climate change, but funding had not been allocated to this cause. The Life After Coal Campaign recommended that this funding could be acquired through carbon taxes under the Carbon Tax Act in an effort to reduce harmful emissions.
• A higher tax rate was recommended, moving towards $75 per ton as soon as possible, to see the necessary incentives for emission reductions.
• The Life After Coal Campaign also hoped that the allowances would be dropped away as quickly as possible to ensure that the carbon tax was meaningful and had the desired effect on carbon emission reduction.

The Chairperson said that the key focus of the meeting concerned the contents of the Tax and Rates Bills that affected provinces that the Committee should reconsider. He reminded stakeholders that the Committee could not amend the Bills. They were merely able to write a report to the National Council of Provinces (NCOP) on the proposed amendments to the Bill for their consideration.

Adv Frank Jenkins, Parliamentary Legal Advisor, confirmed the sentiments of the Chairperson. He said that the NCOP must look into what had happened in the National Assembly (NA) and bring about what could be done concretely with the Bills from a provincial perspective.

National Council Against Smoking

Prof Lekan Ayo-Yusuf, Chairperson: School of Health Systems and Public Health, University of Pretoria, delivered the presentation.

The main points were:

• Excise tax on cigarettes and e-cigarettes was a public health imperative, and the public health goal should be to prevent youth uptake and to promote cessation among users.
• They proposed an amendment of R2.90 excise as a percentage of the retail price, to be moved to R5 per millilitre. This was proposed to start at a flat rate of R50 on closed systems, while everything above 10 millilitres should be R5 per millilitre. They felt this would give a more reasonable excise on the retail price of between 30 and 50%.
• National Treasury (NT) would generate R2.3 billion in revenue when using 250 million millilitres, rather than R725 million under the current proposal.
• It was also believed that the current tax on cigarettes was far below inflation. He proposed 10% rather than the 5.5% mentioned in the Bill.  

(See submission for further details)

 

Tobacco Alcohol and Gambling (TAG) Advocacy

Mr Peter Ucko, Chief Executive Officer (CEO),TAG, presented to the Committee.

The main points of focus were:

• It proposed an increase of at least 20% to 25% on excise. The retail price must be increased by inflation, plus 15%.
• It suggested that tax would not increase the illicit trade. It should rather be used as a health tool which must be used consistently to ensure cigarettes, including electronic devices, heated products and e-liquids, become progressively less affordable.

• It predicted that cessation of smoking would increase job opportunities, reduce pollution and save lives.

British American Tobacco (BAT)

Mr Dane Mouyis, Senior Manager: Fiscal Affairs, BAT, delivered the presentation.

The main points of the presentation were:

• BAT was firmly of the view that the excise needed to be collected from all actors equally to ensure fair competition, with an equal playing field for all participants.
• To ensure a robust excise system, it was suggested that a registration system be introduced, with mandatory millilitre labelling on outer product packaging, implementation of a track-and-trace system with a unique identity code, and creating a broad tax net.
• It was recommended that the implementation date be extended to 1 January 2024 to allow for the necessary public consultation.
• The excise rates were recommended to fall between 46 and 70 cents per millilitre

(See submission for further details)

Just Share

Ms Robyn Hugo, Director: Climate Change Engagement, Just Share, shared the entity’s TLAB submission on the carbon tax.

The presentation focused on why businesses' position concerning the tax was untenable and would exacerbate climate impacts in provinces. They submitted that an effective carbon tax rate was the best method for incentivising practices and strategies that would accelerate decarbonisation and assist South Africa ‘s transition to a low-carbon economy.

It was recommended that the carbon tax should be significantly strengthened.

(See submission for further details)

The Chairperson was disconnected from the platform.

Mr S Du Toit (FF+, North West) took over as Acting Chairperson while the Chairperson was disconnected.

Greenpeace Africa

Ms Thandile Chinyavanhu, Climate and Energy Campaigner, Greenpeace, delivered the presentation.

The main points included were:

• Greenpeace Africa supported the carbon tax on greenhouse gases.
• They supported the higher tax price, and proposed that the price be in accordance with what was advised by the High Level Commission on carbon pricing. This was between R292 and R585.
• The current proposed price of carbon in South Africa was incompatible with the commitments made regarding climate change.
• Greenpeace called for Phase 1 of the carbon tax to be brought to an end.
• It asked for Section 6(2)(c) to be removed, as it allowed for double incentives.
• They opposed carbon offsetting, and proposed that NT remove this from the Bill.

The Chairperson reconnected to the platform.

The South African Medical Research Council (SAMRC)

Ms Catherine Egbe, Specialist Scientist, SAMRC, presented the entity’s inputs on the TLAB and Rates Bill.

The main points of the presentation were:

• A flat rate of at least R5 per millilitre of e-liquid was recommended, regardless of nicotine concentration.
• It was further recommended that there be a base tax of R50 per unit.
• SAMRC suggested that an ad valorem tax on devices and other accessories be applied.
• The Tax Bills should have an emphasis on health promotion.
• Nicotine products required greater regulation.

(See submission for further details)

Vapour Product Association

Ms Asanda Gcoyi, Chief Executive: Vapour Products Association, shared the entity’s submission.

The main concerns of the presentation included:

• Poor areas were reported as underserved in terms of vaping product availability. The Tax Bills were expected to further this inaccessibility in these areas, resulting in illicit and counterfeit products to combat the high prices.
• It was recommended that the sale of vaping products to minors be criminalised.
• It was proposed that a further assessment of electronic nicotine and non-nicotine delivery systems be conducted to gain a balanced view of what it represents for public health.
• It was proposed that NT conduct a socio-economic impact assessment to clearly understand how the tax would impact the industry, specifically small businesses and jobs.
• The South African Bureau of Standards (SABS) should be asked to finalise its standards of testing for nicotine for products being declared.
• Finally, it was suggested that the adoption of the proposed excise duties be postponed by at least 18 months to ensure there was a solid regulatory framework for products. If the proposed taxes were deemed necessary, it was proposed that the tax rate be significantly lowered.

Research Unit on Economics of Excisable Products (REEP)

Prof Corne van Walbeek, Director, REEP, delivered the presentation to the Committee.

The main points of the presentation were:

•  REEP suggested a multi-year taxation approach, in which each year, tobacco excise taxes were increased by the inflation rate, plus a pre-announced additional percentage.
• REEP strongly suggested that there be increases in the excise tax and measures to combat the illicit trade in tobacco products. Furthermore, government was urged to ratify the protocol to eliminate the illicit trade of tobacco products.
• National Treasury (NT) was applauded for its work on designing a system of taxing electronic nicotine delivery systems.
• REEP proposed a floor tax rate of R50 per unit, especially on products purchased by youths.

Department of Health (DoH)

Dr Tshimi Moeng-Mahlangu, Chief Director: Health Promotion, Nutrition and Oral Health, DoH, presented on the taxation of new generation and novel nicotine and non-nicotine products.

The main focus of the presentation was:

• The DoH recognised that new generation products place an increased burden on already compromised health systems. It was suggested that a multi-sectoral approach be taken to control new generation products targeted at the youth and non-smokers.
• The DoH supported the Bills. However, they felt that the tax imposed on these products should be increased to well above inflation, and excise tax should be added significantly to reduce demand.
• It was proposed that some of the revenue be used to monitor quantities of the e-liquids and nicotine content, to ensure compliance.

(See submission for further details)

Cancer Association of South Africa (CANSA)

Ms Lorraine Govender, National Manager: Health Promotion,CANSA, delivered the entity’s presentation.

CANSA recommended that:

• There should be a 10% increase on cigarettes.
• The targeted excise tax burden of 40% be formally disregarded to allow for progressive and significant increases in tobacco taxes.
• CANSA urged the government to commit and provide feedback on the progress of the ratification of the World Health Organisation’s (WHO's) protocol to eliminate illicit trade in tobacco products.
• There should be a R5 per millilitre excise tax and a floor rate of R50 per unit.

(See submission for further details)

Vaping Saved My Life (VSML)

Mr Kurt Yeo, Co-Founder, VSML, highlighted the insufficient and inconsistent research and the monitoring of smoking, including vaping, in South Africa. He acknowledged that while vaping was not harmless, it was significantly more beneficial than smoking, according to numerous studies. He indicated that increasing the excise taxes could cause consumers to revert back to smoking, purchase products through illicit trade, or be encouraged to make their own products.

Congress of South African Trade Unions (COSATU)

Mr Matthew Parks, Parliamentary Coordinator, delivered the Union’s presentation.

The main points of the presentation were:

• COSATU welcomed the Bill and the provisions to delay the increase in the Health Promotion Levy for one year to provide relief for the sugar industry and its value chain. It also welcomed the relief provided in terms of fuel taxes.
• It recommended a comprehensive review of the fuel price regime, to reduce costs.
• It recommended that Parliament put pressure on the Department of Transport to re-table the Road Accident Fund (RAF) Benefit Scheme Bills by February 2023.

(Please see presentation for further COSATU recommendations)

Discussion

The Chairperson suggested that the second part of the hearing be postponed to Tuesday, 22 November.

Ms D Mahlangu (ANC, Mpumalanga) supported the Chairperson's suggestion, and said that consultation should occur with the Select Committee on Appropriations.

Mr Du Toit said that COVID had demonstrated that the illicit market begins to flourish once trade is restricted. He asked if the presenters would be able to share their feedback in the coming weeks on the rise in illicit markets when trade was restricted.

He further noted that the pandemic exemplified that the more inaccessible tobacco products were, there was an increased sharing of cigarette butts. He asked what impact this would have on the health of smokers in general.

He explained that all the taxes generated under these Bills would pool into the fiscus. They would not be ring-fenced specifically for health purposes. He asked what health risks may arise from smokers finding alternatives if smoking became excessively taxed and completely inaccessible. He predicted that the health risks would be much larger than from only smoking tobacco or using vaping products.

Mr D Ryder (DA, Gauteng) said that people were looking to use taxation to drive policy as a blunt instrument. He felt that driving an entire strategy through taxation was not the right route. He felt many of the presentations should be directed towards the Portfolio Committee on Health and others in the environmental sector.

He acknowledged the consensus that vaping was a lesser evil when compared to smoking cigarettes. He agreed with Mr Ucko when he referred to the Bill as ‘Health Taxes,’ and felt that there should be some ring-fencing of funds towards the DoH on the matter. He felt that they should not be taxed equally since there was a difference between vaping and cigarette smoking.

He said there was room for NT to conduct further research in this area. He reiterated that vapes with nicotine should be distinguished from non-nicotine vapes when considering taxation. He felt the DoH should guide the Committee in informing them on which evil was worse, how much worse it was, and what the financial impacts were on the healthcare system.

He said excessive taxation would push many consumers to the illicit trade market. He reminded stakeholders that there was less control available over this area, and how they manufactured their products.

Mr Ryder disagreed with the Greenpeace comment regarding carbon offsets. He said that incentives were required to make industries conscious of their environmental impact, and the incentives would encourage them to mitigate this. He further disagreed with their statement that it was the commercialisation of nature.

He found the tiered impact of the tax on the different vaping products proposed by BAT interesting, and more research should go into it. He also appreciated the Vapour Product Association's presentation.

Regarding COSATU, he said that fuel relief was a massive issue requiring much discussion. An urgent review was required on fuel levies and taxes due to their knock-on impact on inflation and other aspects.

On the sugar tax, he noted that the sugar industry in South Africa was currently in ruins. He questioned whether this had resulted from the tax regime, or if government had reacted too quickly or slowly. He felt this was important to consider when thinking of the carbon tax.

He noted that the quick introduction of punitive measures could easily kill an industry. He felt that a slower, more measured introduction would allow the industry to adapt better to these changes.

Ms Mahlangu applauded the stakeholders on their presentations. She agreed that some issues should be redirected to the Select Committee on Health on account of their expertise in the area. She further agreed that the funds should be ring-fenced for health.

Young consumers should be prevented from purchasing these products through laws. She said that the emphasis could not be targeted only towards the youth. She recalled an incident at an Eastern Cape tavern, where minors had been killed. She stressed that it must be made more difficult for young people to access these products, which she felt could be done by increasing the rates.

On job losses, she disagreed with the point that no jobs would be lost through tightening or eradicating this industry.

The Chairperson said the stakeholders would be notified about the second session of the hearings.

He appreciated the presentations delivered. Many of the issues raised had been discussed by the Committee before, so stakeholders and Parliament must consider how to manage these discussions without repeating issues and being stuck in their respective opinions.

He agreed that many of the issues addressed concerned health and policy, rather than tax concerns, as covered by the Committee. He asked which issues dealt specifically with the impact of the Tax Bills in the provinces. He said that this may be an issue the Committee must look into, to ensure that public hearings were specific to the topic at hand.

He asked how many stakeholders had brought their submissions to the National Assembly before approaching the Committee.

He said the prospect of job losses was untenable. He afforded stakeholders the opportunity to write submissions concerning all the questions raised, and encouraged them to come back for the second session of public hearings.

Ms Mahlangu asked the stakeholders whether they had raised their opinions against tobacco usage during the COVID period, when tobacco was banned, as there had been a great backlash to this decision. She asked this question to assess whether stakeholders had expressed their opinions in all situations, as representatives of public opinion.

Stakeholder responses

SAMRC

Ms Egbe said that the SAMRC had fully supported the tobacco ban during COVID. It had submitted an affidavit regarding two court cases concerning government. She said that the entity had a history of encouraging people to stop smoking in the interest of their health.

She said that if e-cigarettes were helpful, they should be registered as cessation aids. This would allow them to be regulated, and for monitoring of the quantities of nicotine. Currently, the e-cigarette industry failed to follow the Medicines Control Act.

The SAMRC said that the nation must be healthy to go to their jobs and generate tax. She agreed that a multi-sectoral approach must be taken. She said that it had been proven in other countries that taxation was important to reduce usage.

Greenpeace

Ms Chinyavanhu said that advocating for higher taxes would afford the opportunity to mitigate some of the harms already in the health space and the costs to the health sector due to the climate crisis.

Greenpeace asked the NCOP to advocate for removing Section 6(2)(c). It also asked that there be a focus on the lack of standardisation in carbon offset markets. This was because it could potentially impact communities in the rural provinces, such as the Eastern Cape and Limpopo.

National Council Against Smoking

Prof Ayo-Yusuf said that the entity had made clear the economic impact and the imperative for an appropriate tax. He said that one in every five deaths in South Africans older than 35 resulted from tobacco-associated illnesses. These were economically active individuals, which was an important point to remember.

He disagreed that there was insufficient knowledge of e-cigarettes to act on the issue. The National Council Against Smoking recommended that the current proposal should move to a R50 flat rate to protect people. It was urgent that action be taken now.

TAG

Mr Ucko said that tobacco products and electronic devices should be made less affordable. He felt this could be done by increasing the retail selling price through tax. This should be the rate of inflation plus at least 15%.

The goal was to reduce smoking, especially among the youth. This would lead to reduced deaths, lower public healthcare costs and less pollution. The available funds could be used in other sectors, such as education and healthcare.

The Chairperson asked the NT to reply as to why they were against ring-fencing during the next stakeholder meeting.

BAT

Mr Mouyis said that without an effective, robust excise framework, nothing would be collected and there would be fiscal evasion. He asked for more time to address issues with other departments. 

Just Share

Ms Hugo said the carbon tax must be significantly strengthened to ensure adequate greenhouse gas emission reductions. Their presentation had established what these adequate reductions would be. At the very least, the government should stand firm in resisting corporate lobbying against the tax rate.

Vapour Products Association

Ms Gcoyi attributed the focus on health concerns to the fact these issues were being addressed before the industry had been regulated. She said that the matter had not yet been ventilated with the Select Committee on Health.

She reiterated that there must be a regulatory framework and standards in place, and it must be given a chance to unfold. On medicine and vaping as a cessation tool, she said that vaping products were alternatives to smoking. She felt it was coincidental that users should use vaping as a substitute for smoking.

She said that the industry did not view vaping as a medicine, and did not market these products as such. However, she acknowledged the growing evidence that vapes helped smokers quit smoking. She said that the industry had not marketed vapes as medicine, and would not do so.

REEP

Prof Van Welbeek said that South Africa was a member of the Framework Convention on Tobacco Control (FCTC). This was an evidence-based treaty, and the commitments made by the country were based on following this evidence. REEP felt that an increase in excise tax would cause an increase in the retail price, which would decrease consumption. This was an effective way of reducing demand, based on previous experiences with other products. REEP emphasised that there must be effective ways to reduce and limit illicit trade, such as incentives.

DoH

Dr Moeng-Mahlangu said that during the lockdown, many people quit smoking as a result of the inaccessibility. She said the policies suggested were not with the expectation that 100% of people would stop smoking. However, the large reduction in the number of smokers resulting from increased taxes was still beneficial.

The DoH felt it was important to create an enabling environment that discouraged people from accessing these products. Any delays in implementation would allow time for more people to become addicted, so the sooner these measures were implemented, the better the health outcomes would be.

CANSA

Ms Govender agreed that an increase in tax would definitely help to bring down smoking rates, which would reduce the health burden. CANSA felt these concepts could not be separated. Regarding e-cigarettes, it expressed concern for the addiction of youths. It hoped that the increased tax would serve as a deterrent for the youth, reducing the rate of minor smokers.

COSATU

On tobacco and tax jurisdictions, Mr Parks said tobacco affected peoples' health, and cost the fiscus because of workers who had to stop working prematurely. COSATU recognised that the tobacco ban in 2020 had had a negative impact and fuelled illicit markets. It also denied the state revenue it needed to provide public services.

COSATU thought that it spurred a potential collapse in the "sin tax" regime, and made it easier for young smokers to resort to the habit. The right balance had to be struck. The illicit flow of cigarettes must be tackled as it has been increasing at an alarming rate.

He said it would be better to have a legal regime that would pay taxes to the state to help to try to address consumer behaviour. He hoped the Tobacco Bill would include issues such as track-and-trace and increased penalties, including imprisonment for people illegally selling cigarettes. It should also include a smart approach to nudge consumers in the right direction.

He confirmed that there were many jobs in the industry. This included the 500 farms, the distribution, transport and the retail sector. This would require a just transition. Given the 44% unemployment rate, it was about finding the right balance and ensuring a just transition.

COSATU recognised that the health promotion levy had the correct objectives. However, the 70 000 jobs in the value chain must also be protected during the transition to a healthcare diet. He felt that the sugar industry was the real threat. This resulted from the cheap, subsidised imports flooding into the economy from Brazil and other places.

COSATU said the master plan had been trying to see a partnership between government, business and labour to see what support could be given to the industry. This was whilst there was the transition to healthy products. He said issues to look into including how one could buy locally produced goods and give support for some of the high industry costs, such as electricity, water and insurance.

He said that fuel prices had been addressed in Parliament, as COSATU had a key role in putting pressure on government to see what could be done to protect workers, businesses and the economy. Government controlled the fuel price regime through the tax element, which made up one third of the price. The previous and current Ministers of Energy, and the current Minister of Finance, had all made commitments regarding giving space around the fuel price regime. COSATU believed Parliament should help in its reports to put pressure on the matter.

In terms of long-term interventions, the Department of Transport played a part in the Road Accident Fund (RAF) Bill, which could help lessen the pressure on the fuel price regime. The Department should also be considered to see what was being done to protect, maintain and rebuild Metrorail. This would provide protection for consumers against fuel inflation.

The Chairperson felt that the stakeholders were too polarised, and stuck in their particular views. He said that compromises would have to be made. He added that Parliament had to undergo their processes, which would take time.

The meeting was adjourned.