Indirect tax: vapes in South Africa
● From 1st June 2023, nicotine-substitute solutions, including vaping products, will be included
in the tax net with a flat excise duty rate of R2.90/ml.
● The tax was first announced with the 2022 budget announcement.
● Over 25% of high school students use vaping devices in South Africa.
Other measures:
● licensing → after the South African Revenue Service (SRAS) said tobacco products include
vaping products, manufacturers were required to apply for and obtain licenses for their
manufacturing premises in respect of such products with SRAS before 1st of June of 2023.
Impact of the tax:
● Prices are expected to inflate from 5.8% to 217%.
● 22% drop in sales is expected.
● Average price of vaping products could increase by 138%.
● E-liquid consumption could drop by 36%.
● Price of vapes: a 3ml disposable vape priced at R95 before the tax saw an increase of
approximately R10, resulting in a new price of around R105.
○ This modest rise suggests that the tax may not significantly deter youth consumption.
● Price of e-liquids in larger containers: regular vapers purchase 100ml bottlers. The price
doubled from R280 to R613.50 (more than double).
○ This substantial increase could discourage consumption among regular adult users.
Conflicting points of view:
● The vaping industry says the tax will push consumers to illicit markets. → Large industry,
amounted to R1.5 billion in 2022.
● Consumer group Vaping Saved My Life (VSML) said the tax will be detrimental to those
using vaping to stop smoking as well as local small businesses.
Welfare loss:
● Vapers are often smokers who have switched to this safer alternative and will now have to pay
far more for the privilege.
● Substitution effect → if smoking becomes the cheaper option, they will revert.
● Vaping is the most effective method for smoking cessation.
● Health risks: medical guidelines are that vaping is not recommended for non-smokers and
young people as it can carry risks for healthy lungs.
Revenue generation ー impact for the government:
● Estimates suggest ZAR 2.20 billion will be generated annually.
● From 1st June 2023, nicotine-substitute solutions, including vaping products, will be included
in the tax net with a flat excise duty rate of R2.90/ml.
● The tax was first announced with the 2022 budget announcement.
● Over 25% of high school students use vaping devices in South Africa.
Other measures:
● licensing → after the South African Revenue Service (SRAS) said tobacco products include
vaping products, manufacturers were required to apply for and obtain licenses for their
manufacturing premises in respect of such products with SRAS before 1st of June of 2023.
Impact of the tax:
● Prices are expected to inflate from 5.8% to 217%.
● 22% drop in sales is expected.
● Average price of vaping products could increase by 138%.
● E-liquid consumption could drop by 36%.
● Price of vapes: a 3ml disposable vape priced at R95 before the tax saw an increase of
approximately R10, resulting in a new price of around R105.
○ This modest rise suggests that the tax may not significantly deter youth consumption.
● Price of e-liquids in larger containers: regular vapers purchase 100ml bottlers. The price
doubled from R280 to R613.50 (more than double).
○ This substantial increase could discourage consumption among regular adult users.
Conflicting points of view:
● The vaping industry says the tax will push consumers to illicit markets. → Large industry,
amounted to R1.5 billion in 2022.
● Consumer group Vaping Saved My Life (VSML) said the tax will be detrimental to those
using vaping to stop smoking as well as local small businesses.
Welfare loss:
● Vapers are often smokers who have switched to this safer alternative and will now have to pay
far more for the privilege.
● Substitution effect → if smoking becomes the cheaper option, they will revert.
● Vaping is the most effective method for smoking cessation.
● Health risks: medical guidelines are that vaping is not recommended for non-smokers and
young people as it can carry risks for healthy lungs.
Revenue generation ー impact for the government:
● Estimates suggest ZAR 2.20 billion will be generated annually.
