Risk-based taxing can help to balance out various concerns including government interests, public health, and economics.
No longer are traditional cigarettes the primary way that nicotine and tobacco are consumed around the world. In recent years, e-cigarettes have claimed a notable portion of the market, and as a result, governments have had to determine how to respond to this new product category in terms of both regulations and taxing decisions.
In South Africa, this situation has caused the government to evaluate how e-cigarettes will be taxed alongside other similar, but not quite the same, products. Should all of the products in this general category feature the same tax rate? Or should they vary based on the risk that they pose to the general public? These are tricky questions with no clear answers.
Every nation is different, and the way each country approaches taxation on nicotine products is going to vary as a result. South Africa is a nation that faces some specific challenges, namely income inequality that is among the highest in the world, along with a rather poor healthcare system.
Given the background of circumstances that are in place in South Africa, the country may be a good fit for a system that uses risk-based tax rates. Simply put, this kind of system imposes higher taxes on products that pose a greater risk to public health. In this case, it would be a sliding scale of taxes rather than a flat rate that is charged across the board on all nicotine products.
If executed correctly, risk-based taxing can help to balance out various concerns including government interests, public health, and economics. It’s a tricky balance to strike, however, and experts from various fields are sure to differ on how this should be approached and what the right tax rates are to land on a good balance.
Those who are against risk-based taxation see this kind of taxing as a way to limit personal freedom and control the actions of people within society. If the products that are deemed to be more dangerous are made significantly more expensive, those prices will prohibit some people from using those products, meaning they won’t have as much autonomy as they might like to have. While it’s easy to see the benefit to society as a whole that would come along with making more harmful products more expensive, there is a loss of personal freedom that comes with that, and some people will resist such measures as a result.
Governments have an economic interest, and a moral obligation, to watch out for the health of those who live within their jurisdiction. At the same time, tax revenues from the sale of products that are not necessarily good for the health of that population can provide a meaningful boost to the funds that are available for other programs and services, so it’s a tricky balance to strike. Not only in South Africa, but in most other nations around the world, just important choices will continue to need to be made.