Ruan Jooste’s Rants and Cents: You just cannot tax unhealthy habits away

Published Sep 19, 2023


Sweden’s government said this week it planned to abolish a tax on plastic bags as of November 2024, a move heavily criticised by environmental groups. “We’re convinced that the Swedish people use plastic bags wisely in their daily lives and that there’s no reason they should be extra expensive,” Climate Minister Romina Pourmokhtari told Swedish broadcaster SVT.

The proposal comes one week after the government, in power since October 2022, announced it planned to cut petrol and diesel taxes. The proposals have raised concerns that the new government’s climate policy is backsliding after years of pioneering efforts.

According to AFP, the Scandinavian country introduced a tax of three kronor ($0.27 ) on plastics in 2020, though some stores raised the price to as much as seven kronor ($0.63). “In 2019, the year before the tax was introduced, Swedes bought 74 plastic bags per person per year, a number that fell to 17 in 2022, according to the Swedish Environmental Protection Agency,” it stated. The EU target is a maximum of 40 per person as of 2025.

“The tax is considered to have some negative effects, such as administrative costs, and can also lead to increased consumption of other alternatives,” the government said in a statement. Such alternatives include paper bags, the production of which can require higher energy and water consumption‌.

The Environmental Protection Agency (EPA) and the Agency for Marine and Water Management, however, have warned that lowering or abolishing the tax could lead to an increase in plastic waste in nature.

“The plastic bag tax has shown that financial incentives are an effective way of steering consumers’ use,” it said.

Clearly, the EPA haven’t taken the South African scenario into consideration when they came to that conclusion, especially when it comes to ‘environmental taxes’.

Our plastic bag levy was introduced in June 2004 at a rate of 3 cents a bag on some types of plastic shopping bags, with the noble aim of reducing littering and encouraging plastic bag reuse.

The levy was increased to 4 cents a bag from 1 April 2009, 6 cents a bag from 1 April 2013, 8 cents a bag from 1 April 2016, 12 cents a bag from 1 April 2018 and further increased to 25 cents a bag from 1 April 2020.

These levies were intended to be used for waste management and environmental initiatives, such as clean-ups and recycling programmes. However, the reality is that very little of these initiatives materialised.

The second problem is that the South African government does not ring-fence the money raised through this plastic bag levy to use it exclusively for that purpose. The same goes for other ‘green taxes’, such as levies on certain light bulbs and the carbon taxes we pay every time we fill a petrol tank.

In essence, these levies are considered Pigouvian, named after 1920 British economist Arthur C. Pigou, where taxes on a market transaction create a negative externality or an additional cost borne by individuals not directly involved in the transaction. Other examples include sin taxes on tobacco, sugar and alcohol.

The conventional economic rationale for Pigouvian taxes assumes that they affect behaviour by increasing the prices of taxed goods and not by altering people's underlying preferences.

But a quick Google search will make it fair to conclude that the plastic bag levy, and other green taxes for that matter, implemented for the purpose of reducing the environmental impact by repricing in South Africa, is not producing the desired results.

In June this year, for example, Dave Bryant – DA Shadow Minister of Environment, Forestry and Fisheries - said that plastic pollution across South Africa is at epidemic proportions and continues to get worse in areas under the current regime. “Other African countries, such as Kenya, have been able to implement complete bans on certain types of plastic waste, while the ANC government has only been able to implement a tax on plastic bags. The plastic bag fund was subsequently found to have been pilfered and millions of rands stolen by corrupt officials,” he said.

“Recycling is an important component of the fight against plastic waste, but the best way to reduce the amount of plastic is by curbing single-use plastics completely wherever possible. Whilst all South Africans can play a role in reducing their own consumption, a far more significant impact will come via the implementation of bold legislation on a National level. South Africa imports massive amounts of plastic waste from surrounding SADC countries, but the ANC government is still only able to recycle less than 10% of our own country’s plastic waste. This is unacceptably low,” he added.

Look, I’m not advocating a total ban on something as the solution, either. We all know how the ban on smoking worked out during the Covid-19 lockdown. The same goes for the ban on exports of scrap metals extended this year. If someone wants to do something, they will. There is a reason prostitution is the oldest profession in the world, but Bryant’s suggestion does support my theory that a full blanket approach, like with plastic levies, is not the answer.

What it is, I don’t know, but elected officials in this country seem to have lost the plot with behavioural theory entirely. Thinking that simply implementing a tax will reach some sustainability target or health benefit in a few years is an absolute fallacy. Just last month, researchers from the University of Cape Town, drawing from the work of the Research Unit on the Economics of Excisable Products, pointed out the flaws of the new vaping tax and how the price increase claims and the effectiveness of the excise tax regime on vaping products have been overstated. This is something I have written about before.

Government’s focus of late is more on the collection of enough taxes to fund politically motivated social security endeavours. That is the very reason National Treasury postponed the 2023 Medium-Term Budget Policy Statement to November, to find the money to pay for it through cost cutting measures, amongst other things.

But looking at the SA Revenue Service collection data, I don’t even know if all these tree-hugging taxes are worth the effort. Between 2017-2022, the taxman has reported collections of between R11-13 billion per year on all these indirect taxes, which also includes an air passenger tax, tyre levy and electricity levy. There are seven of these green taxes in total. That is just a drop in the R1 563.8 billion collection pot for the year ending 31 March 2022. I was also told by some tax experts at this year’s tax indaba that these taxes are a nightmare to administer and really don’t fall within the ambit of Sars' expertise or focus, for that matter.

So, either the Swedes are on to something, and they are renowned for their efficiency, or South Africans are just tired of being told what to do, especially when policymakers have no clue.