Is sin tax increase a health solution or dangerous trade-off?

• • • • • • • • • • • • • • • Written by Anchen Coetzee

  While the Health Tax Alliance (HTA) has welcomed the government's recent decision to hike excise duties on alcohol and tobacco, arguing that higher prices will curb consumption and ease pressure on the healthcare system, the reality may not be so simple. Will raising prices really stop people from drinking and smoking? Or will it simply push them toward cheaper, unregulated, and potentially more dangerous alternatives? In South Africa, where poverty is widespread and the illicit trade is already thriving, this journalist argues that this policy could create even more health risks rather than reducing it.   In his 2025 budget speech, finance minister Enoch Godongwana announced that excise duties on cigarettes, vapes, and other tobacco products will, as of April 1, rise by 4.75%, while alcohol sin tax would increase by 6.75%. These hikes, aimed at curbing consumption, follow previous above-inflation hikes.       Some members of the HTA see these tax hikes as a positive step, suggesting that South Africa should align with the World Health Organization’s (WHO) recommendation by raising tobacco tax even higher, to 70% of the retail price, up from the current 40%.   The argument from public health advocates is simple: make alcohol and tobacco more expensive, and fewer people will buy it. Although this might seem doable, with positive impacts as far as health goes, the illicit markets are thriving. Therefore, higher prices do not necessarily mean lower consumption. If history has taught us anything, it is therefore debatable whether this state of affairs only leaves the field wide open for consumers to turn to cheaper, unregulated alternatives.   Take counterfeit cigarettes, for example. South Africa already has one of the largest illicit tobacco markets in the world, with an estimated R20 billion annually lost to illegal trade. Sold at a fraction of the regular price, these cigarettes are often produced without any regulation. This poses a greater health risk as they may contain higher levels of harmful chemicals.   This trend can similarly be seen with alcohol. More often than not, when prices increase, black-market liquor sales surge sky-high, leading to the rise of homemade brews, counterfeit spirits, and unregulated imports. Many of these concoctions have, in the past, had not only dangerous but even deadly consequences.   Taking the latter into account, it seems a logical deduction that this will place an even greater burden on healthcare and its providers. We could see more cases of poisoning and lung disease. This in turn could lead to organ failure. Looking at the bigger picture, this could increase the likelihood that private medical aids and other healthcare providers and facilities will be under strain. Should the scale tip in favour of the above outcome, increased claims will most definitely become a reality.   One key question that needs to be addressed is the use of the R1 billion revenue that will additionally be generated from these taxes. How will the government use this? The intention behind the so-called sin tax, which is to offset the healthcare costs associated with alcohol and tobacco use, might sound like a great plan on paper. However, looking back at the history of South Africa, could one be at fault for not blindly taking this as a guarantee? Will these funds really be reinvested into the health system, and will there be transparency?   Sin tax therefore, well-intended as those in power might have us believe, can never be seen as cut and dried or straightforward. Part of the human condition is that if people want to do something, including smoking or drinking, they will find a way to do so, regardless of the price. The only real empowerment of any human being is through knowledge, so instead of relying solely on tax hikes, this journalist believes that a more strategic approach should be taken. The implementation of stronger legal enforcement against illicit markets to start with, while also driving educational campaigns to raise awareness about the abuse of alcohol and tobacco at grassroots level.   In the end, chances are that following these strategies will reduce harm without pushing people toward dangerous underground markets, in turn benefiting the overall health of a new generation and driving South Africa’s healthcare system forward through knowledge.