2016’s mixed budget

The CapeTowner hit the streets to find out what people thought of the recently announced sugar tax.

One of the most anticipated budget speeches left South Africans with a lot to digest after it was delivered by Finance Minister Pravin Gordhan in Parliament last week.

While many were relieved that personal income tax didn’t increase as expected, the talking points from the speech included the increase in sin (alcohol and tobacco) and sugar tax.

“The budget rests on the idea of an inclusive social contract, encompassing an equitable burden of tax and a progressive programme of expenditures,” said Mr Gordhan last week.

The budget proposed the following increase in taxes:

* An introduction of a tyre levy to finance recycling programmes;

* Introduction of a tax on sugar-sweetener beverages; and

* Increases of between 6 percent and 9.5 percent in the duties on alcoholic beverages and tobacco products.

Commenting on this year’s sin tax increase, Alan Phillips, owner of Greenmarket Square’s Sturk’s Tobacconists, said the increase was in line with what he had expected.

As to whether he was concerned that increased sin taxes could have an adverse effect on the business’s revenue stream, Mr Phillips said: “We’re not really concerned. We expected an increase and smokers expected an increase, so I doubt this will affect us, really.”

Josh Gold, manager of Long Street’s Bob’s Bar, said: “Over the past two or three years, we’ve noticed that about a week or so after the increases are announced, our turnover goes down about 10%.

“But, the thing is, it is always this way, so we are kind of used to it.”

Dudu Banzulu, owner of the Long Street bar, Abantu, said: “The increases definitely affect our revenue. But the main thing we look at is whether the suppliers’ costs increase. If they do then we would have to adjust our prices.”

Tony de Freitas, owner of Cadiz Tavern, said: “These prices go up every year, so it’s nothing new.”

Commenting on the sugar tax, Margot McCumisky, acting executive manager of Diabetes South Africa, said they are cautiously optimistic that the increase in sugary drinks will have a positive affect on health in communities.

She also said that diabetes, of which obesity is one of the main risk factors, is most promenant in the Western Cape.

“It’s a step in the right direction. However, it depends on how it is initiated. They’ve done it in Mexico where they have seen a decrease in sales in fizzy drinks. But it is too early to tell if it will help stop obesity.”

According to Ms McCumisky, one in five South Africans consume too much sugar. The recommended daily intake is six teaspoons for women and nine for men. Consumption of just one can of fizzy drink can contain on average seven teaspoons of sugar, and will take up most or all of your recommended daily intake.

“Hopefully the tax would reduce the number of fizzy drinks consumed and South Africans will consume more water, which is a far more healthy alternative,” she said.

Ms McCumisky added that countries that have introduced a tax on sugary drinks have not only reduced consumption, they have raised much-needed revenues for public health measures.

“It would be great if the tax could be used to provide funding for organisations like Diabetes South Africa, who receive no government funding and provide healthy eating-related education and literature aimed at promoting healthy lifestyles and preventing diabetes and other non-communicable diseases.”

Ms McCumisky added that the problem of obesity and diabetes had been overlooked by government for far too long and has become a huge drain on the healthcare system.

Meanwhile, the Cape Chamber of Commerce said that the tax increases announced were modest under the circumstances and that cost-cutting would have to be very effective if the budget deficit was to be reduced to 2.4 percent over three years.

Janine Myburgh, president of the Chamber, said: “One of our biggest problems is the unsustainable cost of the public service. The promised cut-backs on recruitment, frills, travel expenses and the use of cheaper motor vehicles will not be enough.

“We needed more dramatic measures to underline the importance of reducing costs and increasing the productivity of the public service.”

In his speech, Mr Gordhan added: “In view of the need to raise additional revenue and reduce the budget deficit, we have paid special attention to the fairness and inclusivity of the tax system.

“We have also been mindful of the need to moderate the impact of tax increases on households and firms in the present economic context.”