Taxing vapes should be handled with care, experts say

Johannesburg – Imposing excise on vapour products in a country like South Africa could prove detrimental, instead encouraging the kind of illicit trade that was seen for contraband cigarettes during the COVID-19 hard lockdown, Vapour Products Association of South Africa (VPASA) has warned.

The warning came from the Vaping Conversations series, hosted by VPASA, by Arshad Abba, a partner at management consultancy Quantum Logik Consulting and the lead on the 2018 Canback study on vaping and its economic impact in South Africa.

Abba was among the high-profile panel of speakers sharing the platform with moderator Dr Delon Human, co-chair of the Africa Harm Reduction Alliance (AHRA), and fellow speaker Professor Donato Raponi, a freelance tax consultant and an honorary professor of European Tax Law at the Ecole Supérieure des Sciences Fiscales in Brussels, Belgium. Raponi has been ranked several times among the 10 most influential people in the world in tax matters by the International Tax Review.

The final diginar for the year comes as the controversy around the impending Control of Tobacco Products and Electronic Nicotine Delivery Systems (COTPENDS) Bill gathers force. Audience members included government stakeholders, parliamentary representatives and harm reduction advocates, among others.

Raponi, who has worked as an academic and in both the private and public sectors, presented a compelling narrative for the development of a tax framework for vapour products.

“A tax system should be stable but flexible enough to take into account future challenges,” he said, adding that government bodies needed a clear vision on questions such as what to tax, why they impose a tax, what they want to tax, how they tax, how they collect tax, and how the tax will be controlled.

“These points are especially important as the share of the market by vapour products is limited, meaning revenue from taxation would therefore also be limited,” he added.

Commenting on the dangers associated with the imposition of excise on vapour products in South Africa, Abba cautioned that imposing excise could “destroy this category of product”, viewed in many markets as a harm-reduction alternative to cigarettes.

“We also note that the relative price of e-cigarettes is directly related to the price of cigarettes. So when cigarettes are priced significantly higher than e-cigarettes, the market flourishes. And if e-cigarettes are priced too high due to taxes, the market declines,” he said.

Key takeaways from the diginar included a consensus that no excise should be levied on vapour products as it is a harm reduced product similar to that of a mask being worn to prevent contracting COVID-19. However, if excise were to be applied, it should be:

  • Managed within a clear, standalone category after an extensive socio-economic impact assessment has been conducted,
  • Set at a rate that reflects the potentially lower-risk profile of vaping, which has been scientifically proven to be a harm-reduced product,
  • Levied only on nicotine-containing solutions and not on the device, and
  • Should not be linked to nicotine concentration.

“The importance of looking at a risk continuum tax where harm-reduction products are concerned is imperative,” remarked Asanda Gcoyi, CEO of VPASA.

“While the vapour products industry is 100 percent in favour of legislation, we must ensure that conducive environments are put in place for an excise duty to be imposed on an industry.

“It will be of no help to the millions of smokers, or the country’s fiscus,for an excise duty to kill the industry before it has even begun to make an impact in the lives of those looking for less harmful alternatives to combustible cigarettes.”

Sunday World

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