SERIOUS DEBATE ON SIN PRODUCTS IN PARLY

MBABANE – The House of Assembly is set to be a battlefield this afternoon as the controversial Alcohol and Tobacco Levy Bill, 2019 will be debated and there seems to be serious differing of opinions.

While government insists on the proposed seven per cent  levy increase, the Members of Parliament (MPs) through the Finance Sessional Committee,  have recommended a four per cent increase while the stakeholders want no increase at all.
Government’s justification on imposing the levy, is that it’s a way of recouping the lost revenue due to rate deferential between general sales tax and it proposed to introduce the levy.

Government according to the Minister of Finance, Neal Rijkenberg, stated that the levy would also act to discourage the consumption of these sin products to the betterment of the country’s health position.
This is contained in the Finance Sessional Committee Report which was tabled by the acting chairperson of the committee, Ndzingeni MP Lutfo Dlamini, in the House of Assembly on Monday.

However, the committee has proposed to other MPs that the seven per cent rate of levy be staggered over a period of two years in the first year 2019 to four per cent, and in 2020 the remaining three per cent.
However, stakeholders, which include the British American Tobacco Swaziland stated that the seven per cent levy would create a further demand for cheap illicit cigarettes, at the expense of the legal industry, and that the same cigarettes sold in Eswatini would become six per cent more expensive than those sold by South Africa and 213 per cent more than Mozambique, a non-SACU member.

The organisation argued that already illicit products were estimated at around 35 per cent of the total tobacco products in Eswatini, and that government lost at least E36 million in tax revenue annually as a result in of illicit tobacco products.
Meanwhile, the Eswatini Beverages Limited (EBL) submitted that raising excise taxes including levies on alcohol was not an effective way to address alcohol abuse.
“Alcohol abuse is a complex personal and societal issue that requires target measures to solve. High excise taxes penalise responsible drinkers as they were the most sensitive to price changes,” EBL was reported to have submitted.

Options

The beverages company submitted that if anything, high taxes may inadvertently push people into higher risk options including informally or illicitly produced alcohol and encourage cross-border purchasing or smuggling.
EBL further argued that product taxes did not guarantee increased tax revenue, since it assumed that customers would retain previous consumption patterns.
The company said the levy would make Eswatini’s pricing higher than that of South Africa and Mozambique, giving rise to increased smuggling which would lower government tax revenues as the regulated market dwindled and the government tax base shrunk.  

EBL stated that it was a volume driven business and demand for its product was sensitive to price changes that would increase if a levy was introduced.
“At the proposed rates, the total tax contribution to government projected by EBL for 2019 will increase marginally by E1.2 million and the levy will cost E1.6 million in profits in the same period,” submitted EBL.

Meanwhile, government argued that the consumption of alcohol and tobacco had a bearing on the quality of health and life in Eswatini, and that a number of non-communicable diseases (NCDs) were linked to the consumption of alcohol and tobacco.
Government said these included heart disease, stroke and cancer among others.

Government stated that the projection was that 1 000 lives could be saved by 2025 if government implemented policies that would discourage the consumption of these products.
“Therefore the introduction of the levy is one such policy intervention aimed at discouraging consumption,” said government.

Meanwhile , it was the finding of the committee that smuggling of the two products; alcohol and tobacco, was rife and that there were no clear measures to curb the illicit trade, which was why it had proposed staggering as government put control measures in place.                     

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