Tobacco Excise Taxation in South Africa

The past ten years have witnessed a major turnabout in government policy on tobacco control in South Africa. Within a relatively short time, government policy has changed from complete apathy to one where the tobacco control measures are regarded as some of the most pro-gressive in the world. South Africa’s tobacco control policy rests on two impor-tant pillars: legislation and excise tax increases. In 1999 the government passed legislation that banned tobacco advertising and sponsorship, prohibited smoking in all pub-lic places (including workplaces), and banned the sale of tobacco to minors. This legislation was an amendment to an act passed in 1993 that prohibited smoking on public transport and introduced health warnings for the first time. As well as increasing the implicit costs of smoking, the legislation prohibiting smoking in public and work places represents a clear transfer of property rights from smok-ers to non-smokers. Whereas previously smokers enjoyed the right to pollute the air, the legislation unambiguously assigns non-smokers the right to unpolluted air. Although the direct impact of the legislation on tobacco consump-tion is still unclear, the legislation has continued the trend of deglamorising smoking in South Africa. As a result, smoking is no longer regarded as socially acceptable by large sections of the population. In the past decade the government has substantially increased the excise tax on tobacco products for health reasons. Since 1994 the nominal tax on cigarettes has increased by nearly 25 per cent each year. Econometric evidence indicates that the resulting price increases have had a significant impact on cigarette consumption. The aim of this paper is to investigate tax increases in some detail.