The proposal of using taxes from alcohol to fund healthcare services is referring to as earmarking. The earmarking is usually legislated and would usually lead to all or a portion of the funds being used to finance healthcare services in general or a specific aspect of healthcare, e.g messaging on the harmful effects of alcohol. This legislative mandate lies with the Minister of Finance.
Historically the National Department of Health has raised the earmarking of sin taxes (alcohol, tobacco, sugar) as an option with the National Treasury. The National Treasury has been reluctant to accept the earmarking proposal citing the following reasons:
- It introduces rigidities in the budgetary process, limiting availability of funds for alternative and (sometimes) more urgent purposes;
- Can lead to waste of resources when not carefully planned by recipient institution/ programme;
- When tax revenue collection is low then the dependent programme will be negatively affected;
- This may result in fragmentation of pooling and similar demands from other sectors;
- Will eventually shrink as consumption of harmful/unhealthy products declines.