Budget Speech 2020: Vaping industry’s letter to Mboweni about excise duty

The Vapour Products Association of South Africa has written an open letter to Finance Minister Tito Mboweni, urging him not to impose excise duty on vaping products in the upcoming National Budget.

According to the association, this would have a detrimental impact on the small- and medium-sized businesses (SMEs) that comprise the vaping industry in South Africa. It would reduce their ability to contribute to the fiscus via taxes. 

In addition, the implementation of excise on the scientifically proven less-harmful alternative to smoking would increase the price of the product and make it less accessible to millions of smokers, said the association. It represents manufacturers, wholesalers and retailers of vapour products.

Price increase would drive vapers back to tobacco products

“It is our understanding that this excise will considerably increase the retail price of electronic vapour products,” the association states in its open letter, which is signed by Asanda Gcoyi, its CEO.

“There is a high probability that current vapers will be pushed back into smoking and those attempting to find a less-harmful alternative, will be less likely to move away from tobacco.”

If the sale of vaping products declines, it will heavily impact the number of individuals the industry now employs, the organisation claims.

It quotes a 2018 impact study by EIU Canback a global management consulting firm, which found the industry has created more than 4 000 jobs in the retail and wholesale sectors. This number is set to increase to 10 000 by 2027.

Minister asked to ensure growth of relatively young industry

“In the past, you [the finance minister] have proposed mitigating labour laws for the benefit of small business and [the association] therefore urges you to oppose introducing excise for electronic vapour products, at least for the first few years so as to ensure the growth of this relatively young industry,” the letter states.

“Another positive result of this includes smokers of combustible tobacco products turning to vapour products as a less-harmful alternative to cigarettes and, in turn, decreasing the pressure on the proposed National Health Insurance [NHI].”

Three requests from vaping association to Finance Ministry

The letter lists three requests from the Vapour Products Association of South Africa:

• As has been the case in the UK and the EU, a moratorium period of three years to allow for a better understanding of the category and growth of a harm-reduction product in South Africa. The association says it would commit to work with the Ministry of Finance during this period to undertake the appropriate market studies and, consequently, devise the appropriate taxation framework and regime for vapour products; 
• Ensure that no excise is imposed on vaping at this point pending the finalisation of the studies listed under point one; and
• Ensure that all tobacco-containing products in the country are taxed equally. This would provide the government with much higher revenue than if it were to place a tax on vapour products at this stage.