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Cape Town – In light of sin tax hikes, giving up drinking and smoking could have a profound effect on your pocket, said an economist.
Finance Minister Malusi Gigaba announced an increase in sin taxes between 6% and 10%, during his Budget speech on Wednesday.
This could bring in an additional R1.33bn in tax revenue, Fin24 reported.
But for consumers who will feel the pain of higher taxes, ABSA economist Kwaku Koranteng is of the view that consumers can turn the situation around and save thousands.
“Say you spend R500 per month on wine and cigarettes, and you had to quit and rather opt to save that money, you would realise R30 000 in savings over five years without investment growth,” said Koranteng.
“If you took those savings and put them in a fixed deposit savings account with an investment growth of 9% per annum, you would realise R37 712.07 at the end of the five years,” he explained.
“At a time that the entire country is feeling economically pressured, these are significant savings that cannot be ignored. Of course there are the added health benefits of quitting drinking and smoking and the fact that you will be able to enjoy the savings you have made in new and interesting ways.”
In the interests of promoting healthier living Gigaba also announced that the sugar tax on beverages will take effect on April 1 2018. “It is anticipated that the average can of cool drink can cost up to 11% more,” said Cecilia Stassen senior tax consultant at Mazars. Collectively the sugar tax and tax on excise duties will raise R4.5bn in revenue.
The added costs to alcoholic beverages, tobacco and sugary beverages are bound to affect every South African, including the poorest amongst us, she said.
- Visit our Budget 2018 Special for all the news, views and analysis.
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