Tax Justice SA has issued a stark warning ahead of next week’s Budget Speech, cautioning against significant increases in ‘sin’ taxes. According to the organization, such hikes could inadvertently fuel the growth of criminal networks, potentially transforming South Africa into a mafia state.
The proposed increases in excise taxes on alcohol and tobacco products, aimed at boosting state revenue, are seen as a double-edged sword by Tax Justice SA. While intended to fill government coffers, these hikes could exacerbate the already rampant illicit trade in these goods, depriving the state of vital revenue and enriching criminal syndicates.
The illicit trade in cigarettes alone accounts for a staggering 63% of South Africa’s market, resulting in an annual loss of R27 billion in tax revenue. Similarly, the alcohol trade suffers from illicit activity, costing the fiscus R11 billion annually.
Tax Justice SA emphasizes that this lost revenue could be funding essential services such as education, healthcare, and infrastructure. Instead, the illicit trade flourishes, fueled by factors like high excise taxes and proposed legislation.
The organization calls on the government to prioritize enforcement of existing laws to combat the illicit trade, rather than implementing policies that inadvertently benefit criminal elements. By cracking down on illicit activities, the government can protect legitimate businesses, safeguard jobs, and generate the necessary income to build a better South Africa for all citizens.
