1. A Healthy Tax Return
More money, fewer deaths
Dr Yussuf Saloojee
National Council Against Smoking

2. Tobacco use causes
44 000 deaths a year
in South Africa (9% of
all deaths).
Globally it kills 6
million people a year
and this will increase
to over 8m by 2030.

3. The effect of raising tobacco excise
taxes
• Higher excise taxes on cigarettes will
– reduce cigarette consumption
– reduce smoking prevalence; and
– Increase government revenues.
• An increase in “the real price of
cigarettes by 10% globally would
prevent: 10 million tobacco-related
deaths worldwide”
World Bank, 1999

4. Tax & consumption
1st Law of Economics
• When price goes UP consumption goes
DOWN.
• When price goes DOWN consumption goes
UP.
Price - an important influence on
short-term consumption.
4

5. Real prices and cigarette
consumption
South Africa 1960-2008
100 R11
90 R10
R9
80
R8
Packs/adult/year
70
R7
60
R6
50
R5
40 R4
30 R3
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Year
Packs per Real retail pr.

6. Higher taxes mean higher tax
revenues
– Increases in tobacco taxes lead to increases
in tax revenues, despite reductions in tobacco
use.
6

7. South African Rands (constant 2005 prices)
0
1
2
3
4
5
1980 6
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
Excise tax per pack
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Excise tax revenue
2004
2005
South Africa 1980-2009
2006
2007
2008
2009
0
Source: Van Walbeek (2005), updated with data from National Treasury
1 000
2 000
3 000
4 000
5 000
6 000
7 000
Tobacco taxes and Revenuese
South African Rands (thousands) (constant 2005 prices)

8. Why does revenue increase even
as consumption falls?
• Tax revenue = amount sold X tax rate
• High volumes at a low price or
• Low volumes at a higher price.

9. South Africa 1993-2007
– Real excise tax ↑357%
– Real prices ↑146%
– Per capita consumption ↓48%
– Real excise revenue ↑215%

10. Is current tax policy aligned to
health policy?
• No. Tax is no longer consciously and deliberately
used to control levels of tobacco consumption.
100
90
80
70
Packs/adult/year
60
50
40
30
Year
Packs per

11. The Future?
If current tax policy is maintained
tobacco use will increase

12. Potential Revenues for a HPF
Year Excise Tax 2% levy
Rm Rm
2008 7842 157
2007 7004 140
2006 6214 124

13. Levies:Trends
• National
• Road accident fund
• Plastic bags
• Toll roads
International
• Unitaid
• WHO - The Solidarity Tobacco Contribution (STC) for
International Health Financin
• US Financial taxations tax

14. From a win – win
to a win-win-win
Fewer deaths from smoking
More government revenues
More money for promoting the quality of life/

15. Thank You