FINANCE Minister Enoch Godongwana must leave booze and skyf alone when he delivers his Budget speech on Wednesday, 21 February.
Tax Justice SA has warned that increases in "sin" taxes would be a green light for gangsters who are threatening to turn South Africa into a mafia state.
Organisation founder Yusuf Abramjee said hikes in excise taxes on alcohol and tobacco products were among measures that Godongwana was expected to announce to boost state revenue in his speech.
“Unsustainable excise taxes are a major reason for the rampant illicit trade which is already robbing our country of R100 billion every year.”
He pointed out that with the cost-of-living soaring, any hike in sin taxes on cigarettes or alcohol would drive even more consumers to the illicit market, depriving the state of more vital revenue and further enriching sophisticated criminal networks.
“That would signally fail in its stated intention of boosting national coffers and would simply fuel the culture of lawlessness that risks transforming South Africa into a mafia state,” said Abramjee.
Global analysts from Oxford Economics said that 63% of Mzansi’s cigarette trade is now illicit, depriving the fiscus of R27 billion a year or R74 million every day.
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The South Africa Liquor Brand Owners Association (Salba) reports that 22% of the alcohol trade is illicit, costing R11 billion in tax revenue annually.
Abramjee said this should be paying for schools, hospitals, housing and other essential services such as electricity.
“Yet tax is being paid on only one in three cigarettes sold in South Africa. It would be easy to boost state revenues by cracking down on the illicit sector, yet the government seems intent on doing the opposite."
Tertius Troost of Mazars said because this was the election year, he did not believe there would be any budget cuts.
Abramjee said this was also because they may face a backlash, especially from labour unions.
He said cost-cutting measures would probably be kept to a minimum, and the minister will look to obtain additional tax revenue in the form of bracket creep, along with borrowing more from international lenders.
Troost said: “In an election year, cost containment is less likely as the political players want to keep the electorate happy, and the vast majority of the electorate are dependent on government grants.”
He said if businesses do not grow, the tax revenue from corporations is less as they are making fewer profits.
“If businesses are under pressure, they often reduce staff or salary increases to save costs. These measures, in turn, affect how much payroll tax is collected. Finally, if people have less money in their pockets, they are likely to spend less, which affects the collection in indirect taxes like VAT. The state of the economy, therefore, has an impact on all the major income tax streams," said Troost.
