Category: Taxation

South Africa: Treasury Stands by Tax Proposal

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The National Treasury and South African Revenue Service (SARS) is standing by its e-cigarette tax proposals despite protests from businesses, reports Businesstech.
Speaking to the parliamentary standing committee on finance this week, the National Treasury and SARS responded to comments by businesses regarding changes proposed under both the Draft Tax Administration Amendment Bill and the Taxation Laws Amendment Bill.
The National Treasury wants to apply an average excise rate for e-cigarettes of ZAR2.91 ($0.16) per milliliter and apportioned in a ratio of 70:30 between nicotine and non-nicotine elements.
Vapor companies said that considering South African consumers’ purchasing power, a ZAR0.70 duty per milliliter is more than appropriate.
The industry also cautioned that excise duty on vaping products would affect the trade of legitimate tax-paying vendors, drive job losses in the sector and drive consumers to more harmful combustible cigarettes.
The National Treasury countered that the tax is necessary and legitimate and would assist in closing regulatory loopholes that leave South Africans in vulnerable positions.
It added that the long-term health effect of e-cigarettes are unknown, and therefore the government is taking cautionary steps, even if vaping is marketed as a less harmful alternative to smoking.
The current proposed rate is an introductory rate that may be adjusted in the short term to medium term, the treasury said.
September 26, 2022
Nigeria Raises Tobacco Taxes

Photo: Richard Darko
The Nigerian government has enacted a new tax regime this month, reports ICIR Nigeria
On June 1, the ad valorem tax rate has increased to 30 percent from 10 percent. In addition, the government raised the excise rate on cigarettes to NGN84 ($0.20) from NGN58 per pack of 20 sticks. The excise tax is set to increase further to NGN94 per pack in 2023 and NGN104 per pack in 2024.
Shisha tobacco, which is currently taxed at NGN3,000 per liter and NGN1,000 per kg will increase yearly by NGN500.
“This pro-health tax is an effective public health control measure against behavioral risk factors as it can reduce demand and consumption of tobacco products,” said Minister of State for Health Olorunimbe Mamora.
“It will also prompt tobacco users to switch spending their resources on tobacco products to healthy alternatives such as education, health and others.”
In compliance with the National Tobacco Act (2015) and Regulations (2019), the government has also commenced screening and issuing operational licenses to qualifying tobacco businesses.
The new licensing guideline requires strict adherence to regulations requiring graphic health warnings on tobacco product packaging.
According to Mamora, about 4.5 million Nigerians 15 years and older use tobacco products, and about 3.1 million are current smokers.
June 29, 2022
Kenya Plans to Raise Taxes on Vaping
Credit: Vector Shop
Kenya’s Treasury Cabinet Secretary, Ukur Yatani, has proposed to change the excise tax on liquid nicotine to Sh70 ($0.60 cents) per milliliter in a bid to make it less accessible to users, including school children and the youth.
Vaping industry advocates warn the new proposals to raise excise tax on nicotine products will push safer alternatives for smokers out of reach and help the black market thrive, according to The Standard.
Campaign for Safer Alternatives (Casa), a lobby that aims for smoke-free environments in Africa, said the tax changes would result in higher prices of e-cigarettes and negatively impacting those who rely on them to help them stay off cigarettes.
“Doubling the tax on vapes and nicotine pouches is the opposite of a cash cow. If anything, it will drain more money from the Treasury by forcing vapers into the black market,” said Casa chairman Joseph Magero on the proposals contained in the Finance Bill.
“Already, Kenya’s sky-high vaping taxes have created a thriving black market for vape products, with many shops selling un-taxed vapes in broad daylight.”
He said the tax increase will also raise the healthcare costs for Kenya’s government by leaving vapers with no choice but to revert to smoking or using unregulated black market vapes.
April 29, 2022
Bahrain Launches Digital Stamps System

Photo: gonin
Bahrain’s National Bureau for Revenue (NBR) has launched a digital stamp scheme to track excise goods, including tobacco products, from manufacturing to the point of consumption, reports the Bahrain News Agency
The goal of the scheme is to protect consumers from counterfeit or illegal products, limit attempts to smuggle excise goods into the kingdom, and ensure the effectiveness of government revenue collection.
Implementation of the digital stamps will take place in phases in collaboration with Customs Affairs at the Ministry of Interior, the Ministry of Industry, Commerce and Tourism, and the Ministry of Health. There will be three phases. The first phase will focus on cigarette products. The second phase includes implementation on all imported products through customs clearance, and the last phase includes implementation in local markets.
Registration for the scheme is required by excise payers who import tobacco products and their relevant supply chain organizations from production to the release of the products to the local market, according to the NBR.
The NBR held two virtual workshops to help prepare stakeholders for successful implementation of the digital stamps.
April 13, 2022
South Africa: Concern Over New Vaping Rules
Photo: Adrian | Adobe Stock
The Free Market Foundation is concerned that the South African government’s plans for regulating vaping products will push more people back toward smoking combustible cigarettes and buying from the black market, reports BusinessTech.
“The South African government argues that e-cigarette and vaping products are harmful and warrant regulation,” the Free Market Foundation said. “However, e-cigarettes and vaping innovations are tobacco harm reduction products aimed at mitigating the adverse health impacts associated with combustible tobacco products.”
“The total excise duty to be levied on nicotine and a non-nicotine solution, e-cigarettes and vaping, will range from ZAR33.30 [$2.28] to ZAR346. Therefore, poorer communities suffering disproportionately from tobacco-related diseases would be more incentivized to continue smoking cigarettes than pick healthier alternatives.”
“In reality, smokers may simply opt for illicit products, which are cheaper and constitute 42 percent of the informal market for cigarettes. Additionally, illicit goods are more harmful since production standards are not adhered to.”
The illicit cigarette market in South Africa grew substantially during a temporary ban on tobacco and it has yet to shrink to pre-lockdown volumes.
“National Treasury’s proposals to tax e-cigarette solutions that contain no tobacco or nicotine may, in particular, be questioned by some stakeholders as it does not necessarily support the government’s stated policy intention of reducing the consumption of tobacco products,” said Webber Wentzel, a legal firm. “It also could stimulate the illicit trade in e-cigarettes as has happened in the tobacco sector.”
The proposed tax would go into effect Jan. 1, 2023, if passed.
March 28, 2022
Governments Warned Against Big Price Hikes
Policymakers should consider the risks of encouraging the illicit trade of tobacco products before raising the prices through higher taxes, according to Alvarez & Marshall.
In a 2021 report titled “Causes and Control of Illegal Tobacco,” the U.S. consultancy says that taxation policy and its effect on the affordability of tobacco products is an important factor in the global illegal tobacco trade.
“There is a 97 percent correlation between taxes and tobacco consumption,’’ the A&M report said.
“Illegal trade grows when legal tobacco products become less affordable,” it added. “When cigarette prices rise more quickly than consumer incomes, consumers begin to seek cheaper options and switch to illegal products.”
This suggests that increasing the price of tobacco and reducing affordability encourages smokers to seek cheaper products and creates opportunities for criminals. In other words, less affordable tobacco products result in more illegal trade.
“We find that … if cigarettes become 10 percent more expensive for consumers relative to their income, the share of illegal tobacco will rise by an average of almost 7 percent,” A&M added.
In a separate study, relayed by the Business Inquirer, the EU-ASEAN Business Council and Transnational Alliance to Combat Illicit Trade estimates that governments in Southeast Asia lose tax revenues of about $3.32 billion yearly.
Aside from causing monetary losses to governments and legitimate businesses, the illegal tobacco trade undermines public health initiatives, contributes to underage smoking, and funds organized crime and terrorist activities, according to the EU-ASEAN study.
February 14, 2022
Philippines Losing Billions to Illicit Trade

Photo: Piotr Pawinski
The Philippine government has lost nearly PHP3 billion ($588.17 million) in tax revenues since 2019 due to smuggling or illegal entry of cigarettes into the country, reports Philstar.
The Bureau of Customs (BOC) has intercepted 127,675 master cases of illicit cigarettes since the Tobacco Tax Law was approved in 2019, according to BOC Deputy Commissioner Teddy Raval.
The estimated value of the seized cigarettes reached PHP9.73 billion, more than half of which was accounted for in 2020 at PHP5.77 billion. The government forfeited PHP2.9 billion in excise revenues between 2019 and January 2022 due to smuggling of cigarettes.
“They took advantage of the mobility restrictions, including Customs restrictions, but you caught them,” said Albay Representative Joey Salceda in a House hearing, referring to smugglers attempts to take advantage of Covid-19 restrictions.
February 3, 2022
Israel: Knesset Finalizes Vapor Tax

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The finance committee of Israel’s Knesset has approved a slightly modified version of the tax on vaping hardware and e-liquid that was imposed last November, reports Vaping360.
Although the committee reportedly eliminated a separate tax on disposable products, Israel will still have the highest vape tax in the world. Effective immediately, all vaping products will be subject to a tax equaling 270 percent of the wholesale cost, plus NIS15.6 ($4.94) per milliliter of e-liquid.
Both the finance and health ministries aimed to tax vaping products at the same rate as cigarettes. Maintaining that vaping is just as dangerous as smoking, the health ministry initially sought an even higher tax. According to Israel Hayom, Finance Committee Chairman Alex Kushnir “reduced the conversion formula by 30 percent compared to what the Ministry of Health wanted.”
February 1, 2022
Alarm About Ecuador’s Traceability Approach

Photo: ITSA
The International Tax Stamp Association (ITSA) has raised concerns over Ecuador’s decision to allow tobacco and alcoholic beverage manufacturers to hire a provider of their choice to implement the marking and fiscal traceability system required on excise products.
According to the ITSA, this development sets an alarming precedent and could open the “flood gate” to taxpayers across the globe using traceability systems that are in their own self-interest, leading to a significant drop in the capacity of authorities to collect tax revenue.
Last year, Ecuador’s Internal Revenue Service (SRI) published resolutions allowing taxpayers to use any provider for traceability systems in a move that the ITSA says is a fresh blow to the country’s SIMAR traceability system. This has been in place since 2017 to regulate and gather excise on beer, alcoholic beverages and tobacco products and has been instrumental in securing more than $100 million in additional tax revenues, according to the trade group.
The ITSA has already flagged its concerns with the general director of the SRI, reiterating the position that marking and fiscal traceability solutions independent of controlling industry interests are far more effective in securing supply chains and excise. According to the ITSA, these technologies generate independent and precise information to facilitate more effective tax administration through better control of tax declarations and enforcement of taxpayer obligations.
Ecuador’s move heralds a potential conflict of interest between the provider and taxpayer because authorities cannot independently verify production and import levels without controlling the track-and-trace provider. It also sees noncompliance with the World Health Organization’s Framework Convention on Tobacco Control, which Ecuador has signed up to.
“We are deeply concerned that Ecuador’s decision could set an unhealthy precedent for the whole industry, both within the region and globally, which could have a serious impact on the wider tax stamp and traceability industry,” said ITSA President Juan Carlos Yanez in a press note.
“We urge Ecuador’s government, in conjunction with experts, to review its decision about resolutions 19 and 48 and look at fiscal marking and traceability continuity through a new transparent international public bidding process. In this way, the SRI will be able to significantly increase revenue collection via modern and reliable tax payment methods.”
January 21, 2022
Malaysia Postpones E-Liquid Tax

Photo: Holger
The government of Malaysia has postponed implementation of a new tax on e-liquids following complaints from vapor companies and consumers, according to The Malaysia Reserve.
The proposal called for a duty of MYR1.20 ($0.29) per ml of vape liquid or gel, which could have more than doubled the retail prices of bottles for open-systems.
“We are not surprised by this deferment, considering the blowback from vape industry players and consumers over the high duty rate,” said CGS-CIMB Securities analyst Kamarul Anwar.
Vapor companies said the tax would make e-cigarettes more expensive than tobacco cigarettes and force the industry to compete with much-less expensive black market products.
“The tax rates implemented should be made with proportional risks of the product benefits to the hardcore smoking community,” Malaysian Vape Industry Advocacy President Rizani Zakaria told The New Straits Times in October.
The proposal also ran into opposition from medical groups. “The taxation levels for tobacco harm reduction products in Malaysia must remain risk-proportionate, benchmarked against high-risk products such as cigarettes,” Federation of Private Medical Practitioners Associations Malaysia president Steven Chow said in a statement last November.
Malaysia currently prohibits nicotine sales for non-medical purposes. Earlier this year, Health Minister Khairy Jamaluddin informed the World Health Organization that the country would legalize and regulate vaping products to prevent youth access.
January 7, 2022